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4/15/2021 estimated payment


KEYWEST_RICKS

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so we are supposed to pay the first estimate even though the return is not due until 5/15 and we can file an extension on 5/15.

 

what if we didnt send anything in 4/15 but increased the payment sent in with the extension on 5/15 so that the final return has an overpayment that we apply to next year estimated pmts

 

wouldn't this be considered a first qtr estimate still? 

 

thanks

jeff

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16 minutes ago, KEYWEST_RICKS said:

 

 

what if we didnt send anything in 4/15 but increased the payment sent in with the extension on 5/15 so that the final return has an overpayment that we apply to next year estimated pmts

 

wouldn't this be considered a first qtr estimate still? 

 

thanks

jeff

Actually, the AICPA has officially asked that question of the IRS and the IRS hasn't responded or issued any guidance.

Therefore as Lion says, we have to assume this strategy wouldn't work.

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Perhaps timely:

IRS Posted Today Electing To Apply a 2020 Return Overpayment from a May 17 Payment with Extension Request to 2021 Estimated Taxes

 

The IRS postponed to May 17, 2021, the date to file 2020 Forms 1040 and 1040-SR and to pay any related tax. The due dates for estimated tax payments for 2021 were not postponed. The first 2021 estimated tax installment is due April 15, 2021. If an individual taxpayer has a 2020 overpayment and elects to credit the 2020 overpayment against the 2021 estimated tax, the date on which the 2020 overpayment is applied against the 2021 estimated tax depends on: (a) the date(s) of payment, and (b) the extent to which an overpayment exists as of April 15, 2021. An extension of time to file has no effect on either the date of payment or the date on which an overpayment exists.

 

To the extent an overpayment of the 2020 tax exists as of April 15, 2021 (because payments made on or before April 15, 2021, exceed the 2020 tax liability), and the taxpayer makes a valid election to apply the overpayment to 2021 estimated tax, the overpayment would be applied as of April 15, 2021, whether the 2020 return is filed on April 15, May 17, or October 15, 2021.

 

To the extent an overpayment of the 2020 tax is attributable to a payment made after April 15, 2021 (including any payment made after April 15, 2021, but on or before May 17, 2021), that overpayment would not be available for crediting as of April 15, 2021, and would be applied as of the payment received date, not as of April 15, 2021.

 

Example 1: Assume that an individual taxpayer: (a) owes $40,000 in income tax for 2020; (b) made no payments toward that tax by April 15, 2021; (c) owes $10,000 for the first estimated tax installment for 2021 due on April 15, 2021; and (d) paid $50,000 toward the 2020 tax on May 17, 2021. As a result, the taxpayer has a $10,000 overpayment for 2020. Because the payment was not made by April 15, 2021, no overpayment existed as of April 15, 2021, and the overpayment would not be available for crediting on April 15, 2021. Instead, the overpayment would be credited against the 2021 estimated tax installment as of May 17, 2021, the date of payment. The taxpayer's $50,000 payment on May 17, 2021, caused the taxpayer's payments to exceed the taxpayer's liabilities. Therefore, the taxpayer became overpaid on May 17, 2021, and May 17, 2021 is the date the $10,000 overpayment is available for crediting, even if the $50,000 payment made on May 17, 2021, was paid with an application to automatically extend the due date to file the 2020 return to October 15, 2021. An extension of time to file has no effect on either the date of payment or the date on which an overpayment exists.

 

Example 2: Assume that an individual taxpayer: (a) owes $40,000 in income tax for 2020; (b) prepaid $40,000 of that 2020 tax during 2020; (c) owes $10,000 for the first estimated tax installment for 2021 due on April 15, 2021; and (d) paid $10,000 toward the 2020 tax on May 17, 2021. As a result, the taxpayer has a $10,000 overpayment for 2020. Because the taxpayer's payments as of April 15, 2021, did not exceed the taxpayer's liability, no overpayment exists as of April 15, 2021, and the overpayment is not available for crediting on April 15, 2021. The taxpayer's $10,000 payment on May 17, 2021, caused the taxpayer's payments to exceed the taxpayer's liabilities. Therefore, the taxpayer became overpaid on May 17, 2021, and May 17, 2021 is the date the $10,000 overpayment is available for crediting, even if the $10,000 payment made on May 17, 2021, was paid in conjunction with an application to automatically extend the due date to file the 2020 return to October 15, 2021. An extension of time to file has no effect on either the date of payment or the date on which an overpayment exists.

 

Example 3: Assume that an individual taxpayer: (a) owes $40,000 in income tax for 2020; (b) prepaid $45,000 of that 2020 tax during 2020; (c) owes $10,000 for the first estimated tax installment for 2021 due on April 15, 2021; and (d) paid $5,000 toward the 2020 tax on May 17, 2021. As a result, the taxpayer has a $10,000 overpayment for 2020. Because the taxpayer's payments as of April 15, 2021, exceeded the taxpayer's liability by $5,000, an overpayment of $5,000 existed on April 15, 2021, and that overpayment is applied against the first 2021 estimated tax installment as of April 15, 2021. The remaining $5,000 of the $10,000 overpayment is attributable to the payment made on May 17, 2021, which is when this amount would be credited against the first 2021 estimated tax installment, even if the $5,000 payment made on May 17, 2021, was paid with an application to automatically extend the due date to file the 2020 return to October 15, 2021. An extension of time to file has no effect on either the date of payment or the date on which an overpayment exists.

 

Link to the information:

https://www.irs.gov/forms-pubs/electing-to-apply-a-2020-return-overpayment-from-a-may-17-payment-with-extension-request-to-2021-estimated-taxes

 

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1 hour ago, Abby Normal said:

Amounts applied forward are always timely because the IRS already has the money.

Since when has that small fact stopped them! 

Eventually, yes.  Had a battle royale with the IRS some years ago when they had a payment that was not properly applied (by them!) and they were getting nasty about late payment penalties.  We had the cashed-check copy clearly showing the right year and quarter in the memo field, yet the IRS still fought and fought hard.  Had to go to a supervisor!  That person cleared it up instantly, and I hope the agent got reamed a new one for causing a couple of weeks of trouble.

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2 hours ago, Catherine said:

Since when has that small fact stopped them! 

Eventually, yes.  Had a battle royale with the IRS some years ago when they had a payment that was not properly applied (by them!) and they were getting nasty about late payment penalties.  We had the cashed-check copy clearly showing the right year and quarter in the memo field, yet the IRS still fought and fought hard.  Had to go to a supervisor!  That person cleared it up instantly, and I hope the agent got reamed a new one for causing a couple of weeks of trouble.

You're talking about something totally different, a mailed in estimated payment applied to the wrong year. I'm talking about applying a refund to the next year, right on the 1040. I've filed returns in October and covered any missed estimates and not had any problems with late payments since they were all deemed timely paid.

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7 hours ago, Abby Normal said:

You're talking about something totally different, a mailed in estimated payment applied to the wrong year. I'm talking about applying a refund to the next year, right on the 1040. I've filed returns in October and covered any missed estimates and not had any problems with late payments since they were all deemed timely paid.

I've seen applied refunds get messed up, too (yes, with e-filed returns).  

I DETEST applying refunds forward.  Let each year stand on its own - else a problem with one year then involves a second year and doubles the problems that need fixing.  That said, on rare occasion it's the best option for specific reasons.  

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As if congress didn't create enough extra work for us by changing the rules midstream, now we have to calculate estimates due now from returns due in a month.  This week I filed extensions for people who likely won't need an extension just to make a payment that hopefully will cover their first ES.  I prefer that route to making a 2021 estimate outright in the event they do owe some for 2020 the penalty will be lower.

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