IRS Tax Payment for Year 2016

[S T]

Taxpayer is on extension without payment for year 2016. Funds were not available on 4/19/2017.

Funds are now available to pre-pay as either an extension payment or a 1040ES payment on account. We will not have all of the Tax Docs available until Sept 2017 due to Partnership K-1 information.

On IRS Direct Pay now, and seems like only option is to make a payment identified as a Form 1040 Payment, for tax year 2016, even though a Tax Return has not been filed yet.

Anyone ever processed this way?

Thinking it should be okay as the payment will be posted to year 2016, even though the actual return has not been filed.

Thanks

Sandy

[TAXNJ]

Taxpayer is on extension without payment for year 2016. Funds were not available on 4/19/2017.

Funds are now available to pre-pay as either an extension payment or a 1040ES payment on account. We will not have all of the Tax Docs available until Sept 2017 due to Partnership K-1 information.

On IRS Direct Pay now, and seems like only option is to make a payment identified as a Form 1040 Payment, for tax year 2016, even though a Tax Return has not been filed yet.

Anyone ever processed this way?

Thinking it should be okay as the payment will be posted to year 2016, even though the actual return has not been filed.

Thanks

Sandy

Had clients who used IRS Direct Pay with the option you mentioned and it was considered a "payment/credit" for the selected year and form. Classified it as "estimated payments" on return with no problem. Key was to make the payment.

[S T]

Thanks,

Better a payment now even though late, than in Sept 2017! I will show as an estimated payment on the return!

Sandy

[TAXNJ]

Thanks,

Better a payment now even though late, than in Sept 2017! I will show as an estimated payment on the return!

Sandy

Your welcome.

And once payment is made through IRS Direct Pay it is date and time stamped receipt and no fee using that payment method.

[taxea]

You make estimated payments on current year (2017). You make a 2016 payment for 1040 taxes on Direct Pay. And the payment will incur a FTP penalty because it is already late.

[JohnH]

Just be sure to keep records of the payment in case it gets applied to the wrong year. If it happens to get misapplied you'll have a good trail to flow in getting it straightened out.

There's a small FTP penalty and some interest, the total of which amounts to about 3/4 of 1% per month (or the equivalent of paying about 9% APR on the unpaid balance). Not a bad outcome if your client didn't have the money available until now, and a fair interest rate on an unsecured loan with no hassle.

[FEDUKE404]

Showing late payment on tax return & dealing with correct payment year

I recall the IRS payment web page ( https://www.irs.gov/payments/direct-pay ) specifically asks for the year of the tax return involved. Carefully working your way through the payment instructions should take care of any potential "wrong tax year" issues.

Obviously, you cannot now make an estimated payment for tax year 2016. And a late (current) payment also cannot be a valid extension payment either. It would appear the proper placement on the tax return of the proposed "late" payment would be on line 73 of Form 1040, with the "d" box checked and "TAX" noted per the IRS instructions.

FE

[Rapid Robert]

Obviously, you cannot now make an estimated payment for tax year 2016. And a late (current) payment also cannot be a valid extension payment either. It would appear the proper placement on the tax return of the proposed "late" payment would be on line 73 of Form 1040, with the "d" box checked and "TAX" noted per the IRS instructions.

I have an actual experience with this. In June 2015, my client made a large (six figure) payment for TY2014, return on extension. The return was filed in October prior to the extended deadline, and I showed the June payment as an estimated payment on Form 1040 line 65. I should add, the payment was not to make up a huge shortfall for TY2014, but rather it was intended mostly to be applied as an estimated payment to the following year, however in June we did not yet know the exact 2014 balance due, so we wanted one amount applied that could later be split between 2014 & 2015 when the return was filed.

In November, an IRS CP24 letter came announcing $0 (zero) refund change. Under "Changes to your 2014 tax return" it showed zero for line 65 (where I had reported the June payment), zero for "Other credits, lines 66a, 67-73", and on the following line, "Other payments" which did NOT reference any Form 1040 lines, it showed the June payment amount. So while Line 73d might have worked, it also appears the IRS computer has yet another bucket it lumps these oddball payments into.

At least no reply or phone calls were required. The state return did require a phone call, if I remember correctly, to get the amount for state taxes applied correctly.

[FEDUKE404]

Question

I have an actual experience with this. In June 2015, my client made a large (six figure) payment for TY2014, return on extension. The return was filed in October prior to the extended deadline, and I showed the June payment as an estimated payment on Form 1040 line 65. I should add, the payment was not to make up a huge shortfall for TY2014, but rather it was intended mostly to be applied as an estimated payment to the following year, however in June we did not yet know the exact 2014 balance due, so we wanted one amount applied that could later be split between 2014 & 2015 when the return was filed.

In November, an IRS CP24 letter came announcing $0 (zero) refund change. Under "Changes to your 2014 tax return" it showed zero for line 65 (where I had reported the June payment), zero for "Other credits, lines 66a, 67-73", and on the following line, "Other payments" which did NOT reference any Form 1040 lines, it showed the June payment amount. So while Line 73d might have worked, it also appears the IRS computer has yet another bucket it lumps these oddball payments into.

At least no reply or phone calls were required. The state return did require a phone call, if I remember correctly, to get the amount for state taxes applied correctly.

Was your client's payment made ONLINE using the IRS direct pay link previously mentioned?

From "my experience," after the payment is authorized you are immediately given a receipt, that you can print, which shows what was paid, type of payment (balance due/estimated/extension/etc), and for what tax year. One would think that information would seamlessly go into the taxpayer's tax records for the relevant year involved.

As for where YOU placed the number on the filed Form 1040, I can only cite the IRS rules for a payment of the type mentioned in this thread. One would think a human at the IRS could "repair" a minor payment reporting error. But that doesn't change the IRS instructions for how the payment should have been shown on the filed return. I'm not sure a payment made in June, after the April 15th filing/extension deadline has passed, could properly be referred to as an "estimated" payment. Sounds a bit contradictory on the surface. Of course, all estimated payments should be marked (check, online, whatever) as Form 1040-ES 201X SSN to reduce the chances of any IRS confusion. I never heard of assigning a single estimated payment to TWO tax years.

FE

[Lion]

I always use an extension payment that should cover both the prior year balance due and the June ES for my clients on extension who need ES payments. Then when they get me the rest of their information and we file, we apply the excess to ES for the following year. Nothing is late. We don't have to divide the payment between years until we have the final numbers. They don't have two forms and two checks. If we under-guessed, we can make it up quickly in June or later. If we over-guessed, we can have some refunded or continue to use it up for ES payments each quarter.

[FEDUKE404]

Multi-year payment ?

I always use an extension payment that should cover both the prior year balance due and the June ES for my clients on extension who need ES payments. Then when they get me the rest of their information and we file, we apply the excess to ES for the following year. Nothing is late. We don't have to divide the payment between years until we have the final numbers. They don't have two forms and two checks. If we under-guessed, we can make it up quickly in June or later. If we over-guessed, we can have some refunded or continue to use it up for ES payments each quarter.

Not to beat a dead horse, but exactly how do you file/pay a single payment that 1) is an extension payment for tax year 2016 AND the first payment of estimated taxes for tax year 2017 ?? It would seem such would create all kinds of potential problems when the IRS tries to apply the payment(s) to the applicable tax year(s).

Not to mention the fact that the extension window for 2016 closes on April 15th and the estimated payment windows for 2017 open on April 15th.

Of course, the original inquiry on this thread was essentially how to make a "late" 2016 extension payment. I still have problems following that logic. . .

I must be missing something here. . .

OTOH, tossing a lot of funds at the IRS with a (timely) extension payment for 2016, and then rolling over any 2016 refund to 2017 estimates is certainly a valid approach. The only possible pitfall there is either a small/no refund and/or possibly a very late filing (past April, past June, past Sept) of the 2016 return. But then I guess you can make the "April" estimated payment on October 10th or so? ? ?

FE

[Rapid Robert]

OTOH, tossing a lot of funds at the IRS with a (timely) extension payment for 2016, and then rolling over any 2016 refund to 2017 estimates is certainly a valid approach.

Yes, that is what we're saying. But it doesn't have to be a timely extension payment, it can be ANY payment that is properly credited to one year and then the excess, if any, applied as an estimate to the following year when the return is later filed. However if the payment for first tax year was made after 4/15 original filing deadline, the refund applied to the next year's estimates should not be credited as of 4/15, but rather the date actually made.

Obviously a tax payment for a given year can be made after both the extension window and the estimate payment window, since it's been done and it works.

I didn't know about the line 73d instruction that you found above, if I'm ever in this situation again (pretty rare), I'll try it. But what I found interesting was that the IRS CP letter did not move the payment from the estimate line 65 to 73d, it moved it to another bucket altogether, not identified by any line on the tax return.

[FEDUKE404]

Reporting tax payment

Yes, that is what we're saying. But it doesn't have to be a timely extension payment, it can be ANY payment that is properly credited to one year and then the excess, if any, applied as an estimate to the following year when the return is later filed. However if the payment for first tax year was made after 4/15 original filing deadline, the refund applied to the next year's estimates should not be credited as of 4/15, but rather the date actually made.

Obviously a tax payment for a given year can be made after both the extension window and the estimate payment window, since it's been done and it works.

I didn't know about the line 73d instruction that you found above, if I'm ever in this situation again (pretty rare), I'll try it. But what I found interesting was that the IRS CP letter did not move the payment from the estimate line 65 to 73d, it moved it to another bucket altogether, not identified by any line on the tax return.

Line 73 from IRS Form 1040 instructions:
Check the box(es) on line 73 to report any credit from Form 2439 or 8885.
If you are claiming a credit for repayment of amounts you included in your income in an earlier year because it appeared you had a right to the income, include the credit on line 73. Check box d and enter “I.R.C. 1341” in the space next to that box. See Pub. 525 for details about this credit.
If you made a tax payment that doesn't belong on any other line, include the payment on line 73. Check box d and enter “Tax” in the space next to that box.
If you check more than one box, enter the total of the line 73 credits and payments.

FE

[Lion]

I don't tell the IRS to credit a payment to two tax years or two tax types (extension and ES). I tell the IRS to credit a payment to the prior year extension, prior to the deadline. But, my calculation for the client would be an amount that should cover the prior year balance due and the April new year ES (and, often, June ES, or even April, June, and September ES, when I know the client won't get me his Forms K-1 until mid-September). Then, when we file, we have an excess to apply to the new year ES. The ES payments aren't late, as they were made prior to the April deadline.