That is correct. You can apply a portion of your 2020 refund to the 2021 tax year in TurboTax. That would push the excess withholding from the 2020 1/3 to 2021 tax return to cover the 2021 1/3 and do the same for 2022. The 8915-E will be used for penalty relief from early retirement plan distributions and include the option to spread the distribution income over 3 years. This may be a good option if the distribution is pushing you into a higher marginal tax bracket. You may end up paying less tax if you spread the distribution over the 3 years.
To apply of portion on your 2020 tax overpayment to your 2021 taxes:
- Open (continue) your return, if you don't already have it open.
- Inside your return, search for this exact phrase: apply federal refund to next year and then select the Jump to link in the search results.
- Follow the instructions on the Apply Refund to 2021 Taxes screen.
