2020 Tax refund not applied to 2021 taxes owed?

[sam992116]

I had tax refund  of lets say $1000 for year 2020 taxes and I applied that refund towards 2021 taxes. It went fine. But I ended up filing for extension and I got additional $100 refund and I also applied that refund towards 2021 taxes.

I filed for extension for 2021 taxes and have not filed my taxes yet. I recently got $100 + some change (interest rate I assume) check from IRS and I was bit surprised to see that check. It took almost one year for check to arrive and I forgot what it was about. I did some searching and finally figure it out it was refund which came from extension filing portion.

I did check Turbo Tax (download version) and in the software (under Other Tax situation and Apply refund to next year) it was cleared listed $1100 ($1000 original and $100 extension refund)  refund  will go towards 2021 taxes but it did not. Then I checked all forms  in forms mode and there in form 1040 X- line 22 it was marked $100 will be refunded to me.

But in same extension filing after 1040-X there is regular form 1040 also appear with all new figures. In that form line 34 under refund section clearly list $1100 ($1000 with original and $100 extension)  will be applied towards 2021 taxes and 35a amount refund as $0.

Q. Is how this happened? Software is showing something else and under IRS forms 1040X and 1040 has conflicting information.

Q. Should I deposit this check or send the check back to IRS stating to be applied towards 2021 taxes. I assume this will make it more unnecessarily complicated?

Q. Now I am preparing for 2021 taxes. TT imported data form last year. TT imported $1100  refund applied towards 2021 tax year in payment section. How can I correct this amount to $1000? I guess software is not computing numbers correctly, do I have to check and change via forms mode on my own?

Q. Since IRS sent me refund and some change in interest payment. Will I get some sort of from from IRS for interest rate portion and when will I get one and for which tax year?

[VolvoGirl]

I can't tell about the 2020 refund amounts applied to 2021.   But the IRS may send you a 1099Int for the interest.  If they don't you still have to enter it on your 2022 return next year.  It is 2022 interest because you got it in 2022.

[fanfare]

don't send IRS checks back and don't try to apply them to 2021 taxes.

when you complete 1040, look for "amount you owe".

Pay that amount.

If you got any interest from IRS on a 2020 refund, enter that interest on 2021 Schedule B.

@sam992116 

[sam992116]

Thanks fanfare and ValvoGirl:

How do I change amount of refund from 2020 applied towards 2021 taxes? Right now it is showing $1100 ($1000 with original +$100 with extension)?

Just change it manually in main software or in the forms mode? assuming software does not do anything funny on its own?

[sam992116]

Thanks fanfare and ValvoGirl:

I am bit confused to which tax year should I apply refund interest? It is only $3 !

That refund came from 2020 tax return and it only came a month ago and so far I did not get any form from IRS so far. I have not filed my tax return for 2021 yet.

Q. Should I enter in 2021 tax year or 2022 tax year? I don't want to end up filing amended returns for both 2021 and 2022 tax years.

[Critter-3]

Depends on whether you paid an estimated tax or you paid taxes with an extension request.

Amount applied from last year is considered part of the first estimated payment ... check to make sure it is showing up correctly as such ...

To enter, edit or delete estimated taxes paid (Federal, State, Local) -

• Click on Federal Taxes (Personal using Home and Business)
• Click on Deductions and Credits
• Click on I'll choose what I work on (if shown)
• Scroll down to Estimates and Other Taxes Paid
• On Estimates, click on the start or update button

Or enter estimates paid in the Search box located in the upper right of the online program screen. Click on Jump to estimates paid

To enter, change or delete a payment made with an extension request (Federal, State, Local) -

• Click on Federal Taxes (Personal using Home and Business)
• Click on Deductions and Credits
• Click on I'll choose what I work on (if shown)
• Scroll down to Estimates and Other Taxes Paid
• On Income Taxes Paid, click on the start or update button

On the next screen select the type of extension payment made and click on the start or update button

Or enter federal extension payment in the Search box located in the upper right of the program screen. Click on Jump to federal extension payment

The federal extension payment will be shown on Schedule 3 Line 10. The amount from Schedule 3 Part II Line 15 flows to Form 1040 Line 31.

[VolvoGirl]

They paid the interest in 2022.  So it goes on your 2022 return next year.  Just like bank interest.  You  shouldn't get a 1099Int for it so keep track of it.  

[Critter-3]

@sam992116 

The Refund was recieved in 2022 (no matter which tax year it was for)  and the interest on that refund was recieved in 2022 so it will be reported on the 2022 return you file next year. 

[sam992116]

"Depends on whether you paid an estimated tax or you paid taxes with an extension request."

I did 3 things for both 2020 and 2021 taxes

1. Applied refund from prior year to next year.

2. Made regular 4 estimated tax payment in prior year

3. Made tax payment along with extension filing.

I am assuming Volvogirl might be right,  Since I got interest along with refund in year 2022. That interest should be reflected on 2022 tax return (even though interest came from 2020 tax return over payment).

[sam992116]

Thanks VolvoGirl and Critter-3