Apply portion of refund to next year - EFFECTIVE DATE?

[imi138]

Hi,

I am tardy with making estimated payments on time, but ended up overpaying for the 2022 tax year overall.  I made my estimated tax payments on Sep 2022, Jan 2023, and June 2023.  

I want the IRS to apply a portion of my 2022 tax refund to the 2023 tax year.  However, I want to make sure they apply the earlier tax payments (e.g. Sep 2022, Jan 2023) to the 2023 tax year, as these have an earlier effective date to help minimize interest.  

What would be the best way to make sure they apply the earlier tax payments to 2023, but refund me the latest tax payment?

Thank you!

Thanks for your help

[NCperson]

@imi138  I don't beleive it works that way.  The IRS does not pay interest on the money you give them which in effect is what I think you are asking for.  

They assume that your tax liability is the same each quarter (unless you complete form 2210) and then they will credit the payments on the date received to determine if there are late payment penalties, but they do not pay interest if you overpaid. 

If you overpaid your taxes and want the refund credited to 2023, they will credit the June 2023 payment first and I would imagine give you credit as of that date for the 2023 tax year (it was late for 2023 tax year as well). 

[imi138]

@NCperson Thanks for your quick reply!

To clarify, I am not expecting IRS to pay me interest.  Rather, I would like them to apply the earlier payments to my 2023 account so that they will charge me LESS interest for being late in 2023.  

Is there any way to request the earlier payments to be credited to 2023 first to achieve this?  

Thanks for your help!

[VolvoGirl]

Not sure how you could have made 2022 estimated payments in 2023.  Well the 4th qtr was due Jan 15.   Sorry you can't apply certain payments like that.  The amount applied to 2023 will go towards the first quarter payment .  

If you end up with a 2022 penalty......

You might be able to eliminate it or at least reduce it.  You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you.  It's form 2210.

It's under

Federal or Personal (for Home & Business Desktop)

Other Tax Situations

Additional Tax Payments

Underpayment Penalties - Click the Start or update button

[VolvoGirl]

So you already expect to be paying your 2023 tax due late after April 18, 2024?  What you are saying doesn't quite make sense.  

[fanfare]

the penalties associated with missed ES payment are called underpayment penalties.

When to pay — Estimated tax payments are due four times a year:

April 15 for payment period January 1–March 31
June 15 for payment period April 1–May 31
September 15 for payment period June 1–August 31
January 15 for payment period September 1–December 31

IRS computes the number of days you are late after the expected date until the next expected date.

the annualized penalty interest rate is higher for the later dates than for the earlier dates.

If you apply a refund to next year, it goes toward the first ES payment period.

@imi138 

[NCperson]

@imi138 but in effect you are expecting the IRS to pay you interest because you want to be charged less.  It's the same thing.  doesn't work that way 

The IRS assumes that the tax liabiltiy and the withholdings occur equally each quarter and then applies the payments when they are actually received.  that is simply the way it works 

if your income is "lumpy" you can complete form 2210 and do the quaterly math which could reduce the interest you owe.  

[Mike9241]

that's not how it works, and you have no choice. 

based on prior IRS announcements (not for 2022 specifically) any overpayment existing from applying the Sept and Jan payments to your tax liability is applied to 4/15/2023. The June payment is applied to any remaining tax liability and the excess is credited as a payment of the 2023 taxes on the date the payment was received.   Different rules may apply for certain Californians. If the IRS charges you penalties, you should get a notice. most likely the amount you asked to be applied to 2023 will be reduced for these penalties