Applying 2018 Federal Tax Overpayment to 2019 Tax Estimate

[harllee]

I spent today doing a first draft of my 2018 taxes on Turbo Tax. I will probably wait to actually file for a few more weeks in case there are any changes. I pay estimated taxes. To my surprise I overpaid my Federal estimates for 2018 by about $4000. That never happened before (my income was a little less than I had estimated and I had forgotten that not all my Social Security is taxable). Anyway, Turbotax gave me a choice of getting a refund or applying the over payment to my 2019 estimate. I am inclined to apply the refund to my 2019 estimate, that will mean I will not have to make the first couple estimated tax payments and will simplify things. Has anyone applied an overpayment to the next year's estimate? Any problems I should look out for?

Thanks!

 

[gwraigty]

Take the $4000 refund, where it can work for you instead of the federal govt.

 

[jimbee]

I would collect the tax refund and put it in my online savings account, getting 2.1% interest until I have to pay my estimated taxes. The result isn't a lot of money, but it may be enough to make the five minutes needed to setup the estimated payment worthwhile. It sounds like you're going to have to estimate your taxes anyway.


Estimate how much interest you can collect by delaying the payment to April and June.

 

[harllee]

The first tax estimate will be due 4/15 and the next one is 6/15 so I would only earn at most a couple months of interest (who knows how long it will take to get refunds this year), hardly worth the time it will take to get the refund and then have to turn right around and send in the estimate. I estimate the amount of interest I would earn would only be a few dollars.

 

[scrabbler1]

I prepare the tax returns for my best friend and my ladyfriend. A few times in recent years, when either of them was slated to get a small refund ($50 or less), they chose to apply the amount to the following year's taxes. They did this because it was a minor nuisance to deposit a small check and they didn't want to do it electronically.

 

[CardsFan]

The first tax estimate will be due 4/15 and the next one is 6/15 so I would only earn at most a couple months of interest (who knows how long it will take to get refunds this year), hardly worth the time it will take to get the refund and then have to turn right around and send in the estimate. I estimate the amount of interest I would earn would only be a few dollars.

I think you are right. Why get a refund and turn around a few weeks later and send it in.

Since retiring I have not made any quarterly payments. In December, after estimating the taxes due, I make a withdrawal from my tIRA and withhold most of it as federal and state taxes. Of course, that money is taxed as well, so I need to account for that.

 

[Alan]

As an overseas resident we file in May and this last couple of years we have overpaid by a sum close to the first estimated payment so we simply apply the overpayment to next year’s taxes.

 

[Another Reader]

I do monthly withholding so I take the refund and put it into savings. True it up when I file or I make an educated guess in April allowing for some over payment if I don't file until October.

 

[RunningBum]

I do monthly withholding so I take the refund and put it into savings. True it up when I file or I make an educated guess in April allowing for some over payment if I don't file until October.

How are you getting your refund before you file? What is it that you "true up"?

 

[ocean view]

To the OP, there are no risks or concerns with applying the 2018 over payment to 2019, especially if you would normally make estimated payments.

Btw, it is not an all or nothing decision. You could apply enough to cover the 1st ES payment and then refund the balance, or any other split as you see fit.

 

[audreyh1]

I spent today doing a first draft of my 2018 taxes on Turbo Tax. I will probably wait to actually file for a few more weeks in case there are any changes. I pay estimated taxes. To my surprise I overpaid my Federal estimates for 2018 by about $4000. That never happened before (my income was a little less than I had estimated and I had forgotten that not all my Social Security is taxable). Anyway, Turbotax gave me a choice of getting a refund or applying the over payment to my 2019 estimate. I am inclined to apply the refund to my 2019 estimate, that will mean I will not have to make the first couple estimated tax payments and will simplify things. Has anyone applied an overpayment to the next year's estimate? Any problems I should look out for?

Thanks!

Yes, I have done that in the rare event of a refund and no, never any problems at all. Just be sure to enter it into your 2019 tax return. Turbotax will carry it over to 2019 for you.

Since I have estimated tax due on 4/15 and I have rarely completed my taxes before the end of March due to forms/info delayed from my brokerage, I never worried about a few weeks worth of float to me.

 

[gayl]

I roll it over and skip the 1st pymt (due about the same time you'd get the refund)

 

[harllee]

To the OP, there are no risks or concerns with applying the 2018 over payment to 2019, especially if you would normally make estimated payments.

Btw, it is not an all or nothing decision. You could apply enough to cover the 1st ES payment and then refund the balance, or any other split as you see fit.

Thanks for this tip. I am thinking I will rollover enough for the first estimate and request a refund of the rest and spend that "found" money on something fun.

BTW as discussed on another forum thread there appears to be a mistake on the Turbotax federal form so I guess I will be waiting to file until that mistake is corrected.