Amended Return Applied Refund

[Snaggletooth]

I am doing an amended return from 2014 with a substantial refund. It is virtually certain the refund will mostly, if not totally, be valid once they process it.

We would prefer that this refund be applied to their 2016 estimated tax. At one time, the IRS would only allow prepayment of estimated tax to the following year. However Drake is allowing credit to ANY year.

Anyone have experience with this?

Thanks

[Roland Slugg]

Form 1040X is not "year specific" and can be used for any open year. You have to enter the year being amended at the top. When electing to apply some or all of an overpayment as an estimated tax payment, the usual year will be the current year, but there can sometimes be two possibilities. If you are now amending a 2014 return, an overpayment being designated as an estimated tax payment could go to the year 2015, if the 2015 return has not yet been filed. But if 2015's return has been filed, then the designated estimated tax would be for the year 2016.

I suppose it's even possible to apply a refund arising this way to an even older year, such as applying a 1040X refund for the year 2013 to estimated tax for the year 2014. If the 2014 tax return has not yet been filed, and there is going to be tax due when it is, this might serve to reduce or eliminate the underpayment and late payment penalties and interest that would otherwise apply. I don't see how it could hurt to try, so if this applies to a client of yours, why not give it a try?

After writing the comment above about a possible reduction in interest and penalties, I realized that whether or not that would be the case would depend on when the 1040X estimated tax applied was deemed to have been paid. Would it be deemed paid, say, as of April 15th of the year after the year being amended? Or would it be deemed paid when the 1040X was processed and the refund shown thereon was authorized for payment and/or applied to another year's estimated tax? I don't know the answer to this, but I do know that the rules for paying interest on refunds can be confusing and unclear.

[Snaggletooth]

Thanks for this

Actually the taxpayers endured a loss of their home to a tornado in 2014, so part of 2014 and ALL of 2015 were low-income years. They are returning to higher income in 2016 and are not paying in enough to meet their estimated goal.

The amended return shows a refund of $6500 with about $1000 questionable. The danger in applying to 2016 would occur if the IRS didn't process their amended 2014 return for a long time. This may sound unlikely, but not in these days of reduced staff. If it doesn't happen in time to file 2016 return, taxpayer is cooked.

Since there is no refund, taxpayer also risks non-notification from IRS even if amendment is accepted. I have seen letters that acknowledge the amended return being processed but I don't think we can assume anything.

Thanks, Roland.

[Kram BergGold]

Has Never Worked for Me

I have only tried to have a refund from 1040X applied forward maybe 3 times and it has never happened. They always get a check. I remember one time they sent us a letter saying it could only be applies to the next year. Based on my experiences it most likely won't work but you lose nothing when you try it.