That means the IRS owes you $365. You can either get it as a refund, or have them apply to towards 2021 taxes.
It means that last you year (2020) more taxes were withheld from your pay than you owe. So you have $365 coming back to you. If you answer yes to the question, you can allow the feds to keep the $365 or a part of the $365 as prepaid taxes for next year (2021). If you answer no, you will get all $365 back as a refund from the feds in the next month or so.
An overpayment is your refund. You can have them keep all or part of your refund as an estimated payment towards next year's tax return. But most people want to get their refund now. So to get your refund now do not say to apply it to next year.
How are "Apply Overpayment to next year's taxes" captured in that next year's tax return if you cannot enter it in Est payments section?
@Barstad wrote:
How are "Apply Overpayment to next year's taxes" captured in that next year's tax return if you cannot enter it in Est payments section?
To add, change or delete a current year federal tax refund to next year's taxes before you file your tax return -
Click on Federal Taxes (Personal using Home and Business)
Click on Other Tax Situations
Under Additional Tax Payments
On Apply Refund to Next Year, click on the start or update button
Or enter apply federal refund to next year in the Search box located in the upper right of the program screen. Click on Jump to apply federal refund to next year
The amount applied to next years taxes will be shown on Form 1040 Line 36
@Barstad For NEXT year it should automatically transfer over. If it doesn't or you need to change the amount Go to,
Federal on left
Deductions and Credits at top
Then scroll way down to Estimates and Other Taxes Paid
Other Income Taxes - Click the Start or Revisit
Next page scroll down to 2022 Refund Applied to 2023.
Click Start or Update by the tax you applied