Late file Federal refund due/Penalty on Estimated Tax?

[jnoelle]

Extension filed on 2023 Federal return with refund due - will penalty be applied to 2024 estimated tax payments?

I need an extension to file my Federal 2023 taxes

I pay estimated tax quarterly, with next payment due April 15, 2024

I am due a 2023 refund, which I will apply to my 2024 Estimated Tax payments - but due to extension on filing Federal return, they will not be applied by April 15.

Will IRS charge apply interest/underpayment of estimated tax penalty in this case?

IRS will be in possession of my money by April 15, but I will not have directed it to 2024 estimated tax payment yet

[JohnB5677]

Yes, even if you file an extension you can apply your 2023 refund to 2024 taxes.  

As you said the IRS already has the money, You just have to authorize them to do it.

To do this, log into your account.

            

1. Select Tax Tools
2. On the drop-down select Tools
3. There will be 4 green boxes
4. Select Topics Search
5. Type Apply refund to 2024 tax return
6. The screen Get Your Refund Now or Apply It to Next Year's Taxes will appear
7. Select to apply the refund to 2024.

                

Although you wont file until later in the year.  The IRS has had the money since before April 18th, so it can be applied to your first quarter payment.

[jnoelle]

@JohnB5677 

My question remains unanswered--

will the IRS apply an underpayment of estimated taxes penalty in this case?

[JohnB5677]

I'm sorry,  I wasn't clear.

No, you will not get an underpayment penalty for estimated taxes, provided you make all the payments for the proper amount due and timely.

1. If your refund will exceed your first quarter payment, you can apply it as the first payment.
2. If your refund is less than the required first payment, you must make up the difference.
3. If your refund is grater than the required first payment, you can take the excess portion and apply it to the second quarter, and so on.

As stated above:

"The IRS has had the money since before April 18th, so it can be applied to your first quarter payment."