FORM 1040X QUESTION

[Booger]

I am preparing a 1040X for 2007. Client did not receive a brokerage

statement until AFTER the original 1040 was filed.

On the original 1040, an overpayment of tax of $1,000 was reported, and

I applied it ALL to the taxpayer's 2008 liability (NO REFUND WAS REQUESTED).

When I prepare the 1040X, the client now owes $300. Does the $1,000 need to be reported

on line 19 (overpayment line) of the 1040X? Seems to me that if I report it there, the client will be paying MORE

than what is owed on the amended return.

I apologize if this is a STUPID question.

Booger

[bay]

I would attach a letter to the amendment and specifically request the IRS to apply the initial overpayment to the amended amount due.

Good Luck

[RitaB]

I am preparing a 1040X for 2007. Client did not receive a brokerage

statement until AFTER the original 1040 was filed.

On the original 1040, an overpayment of tax of $1,000 was reported, and

I applied it ALL to the taxpayer's 2008 liability (NO REFUND WAS REQUESTED).

When I prepare the 1040X, the client now owes $300. Does the $1,000 need to be reported

on line 19 (overpayment line) of the 1040X? Seems to me that if I report it there, the client will be paying MORE

than what is owed on the amended return.

I apologize if this is a STUPID question.

Booger

Yes, I think you are correct to put 1000 on line 19. I would send a check for 300. Well, not me personally, you know what I mean.

[jainen]

>>if I report it there, the client will be paying MORE than what is owed on the amended return<<

If the refund has already been applied to 2008 estimates, I wouldn't trust the IRS computers to reallocate it. You'll get more reliable results dealing with a real person on Practitioners Priority Line. Call them before you mail the X, or after the client gets a balance due statement.

[MAMalody]

The effect of line 19 on the Form 1040X is to disallow any additional benefit of any prior refunds on the original return. The TP had a benefit that he applied to the subsequent year return. So, if you are saying that you tax liability on line 10 increased $1300 over the original return, I don't see the problem because the TP already used the refund benefit from the orignial return. As I recall the application to a subsequent year refund cannot be changed once made. Have I misunderstood your question?

[Booger]

MaMalody, you are correct. I have to have the client pay BOTH the $300 additional

tax due AND the overpayment claimed on the original Form 1040. I forgot that, once

the overpayment was applied to the subsequent year, that CANNOT be changed.

Booger

[RitaB]

MaMalody, you are correct. I have to have the client pay BOTH the $300 additional

tax due AND the overpayment claimed on the original Form 1040. I forgot that, once

the overpayment was applied to the subsequent year, that CANNOT be changed.

Booger

Oh, so he would have owed $1300 on the original return? I didn't get that part. So, client will have to write a check for $1300. (Well, that's what I would have him do.)

And, of course, this is all your fault cause your crystal ball was in the shop when you prepared the original return, right? (Haha.)

Just had a call, and I am surprised I have not had more: "Did you put put my refund in the bank?" (Like I am giving out tax refunds personally.) Me: "Did you tell me to?" Turns out she had no refund, but she is listening to the stimulus news...

[joanmcq]

Nah, seems to me he would have owed $300 on the original return, but instead had a $1000 refund which he applied to 2008. So now he owes $1300 because once applied, it can't be pulled back.

[Cathy]

Seems we really aren't too old to learn new things. I will think twice before encouraging clients to apply overpayment to next year's estimated taxes. They keep your $...no interest......if you owe additional taxes then tax plus interest and penalties even though they have use of your refund (interest free at that). From IRS.gov:

Credit an Overpayment

If you show an overpayment of tax after completing your Form 1040 or Form 1040A for 2007, you can apply part or all of it to your estimated tax for 2008. On line 75 of Form 1040, or line 45 of Form 1040A, enter the amount you want credited to your estimated tax rather than refunded. The amount you have credited should be taken into account when figuring your estimated tax payments.

If you are a beneficiary of an estate or trust, and the trustee elects to credit 2008 trust payments of estimated tax to you, you can treat the amount credited as paid by you on January 15, 2009.

The credit will be applied to your payments in the order necessary to avoid the penalty for underpayment of estimated tax. You cannot have any of that amount refunded to you until the close of that tax year. You also cannot use that overpayment in any other way.

Example.

When Kathleen finished filling out her 2007 tax return, she saw that she had overpaid her taxes by $750. Kathleen knew she would owe additional tax in 2008. She credited $600 of the overpayment to her 2008 estimated tax and had the remaining $150 refunded to her.

In September, she amended her 2007 return by filing Form 1040X, Amended U.S. Individual Income Tax Return. It turned out that she owed $250 more in tax than she had thought. This reduced her 2007 overpayment from $750 to $500. Because the $750 had already been applied to her 2008 estimated tax or refunded to her, the IRS billed her for the additional $250 she owed, plus penalties and interest. Kathleen could not use any of the $600 she had credited to her 2008 estimated tax to pay this bill.