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There are only 3 options when it comes to filing taxes. Either you pay taxes, break even or get a refund from the IRS. If you are getting a refund, your accountant or tax software may ask you “Do you Want to apply your refund to Next Year’s Return?” Read on to better understand your options.Many taxpayers like receive their refund right away in their account via direct deposit or check by mail. Some choose a different path, Taxpayers can choose to apply their tax refund to next year’s estimated taxes either to the first Quarter estimated tax or spread the amount though out the year.What Does it Mean to Apply Refund to Next Year’s Return?
It means that instead of receiving your refund as direct deposit or check you choose to apply the refund to next years taxes. This option is useful if you expect next years taxes to be significantly higher and you believe its best to pay those taxes though applying refund instead of getting the refund and then resending that to IRS as Estimated Payment.
Why would I want to apply my refund to next year’s tax?If your current years income was lower or you over paid your estimated taxes then applying your refund to next year is the best option.This option is useful if you expect next years taxes to be significantly higher(Due to Higher income) and you believe its best to pay those taxes though applying refund instead of getting the refund and then resending that to IRS as Estimate
How Do I Know If I Applied My Previous Year’s Refund to My Current years Taxes?
Are you trying to find out if you applied last year’s tax refund to this year’s taxes?
For example if you are filing your 2021 taxes, then check at your 2020 federal return page 2 line 36. It will list how much if any amount was rolled over to current year(2021)
How do I change from applying overpayment to next year to immediate refund?If you are in process of filing your current years return, your tax accountant or software will ask you if you want to receive your refund or apply all or part of your refund to next years taxes. You can answer to receive your refund instead of apply to next year.
If you have already filed tax return, you may have to call IRS and request the refund. IRS phone number is 800 829 1010 for customer service.
How do I apply overpayment to next year’s taxes?Your accountant or tax software will ask you, ” Do you want to apply your tax refund to next year? Yes or No” then answer Yes and your refund will be applied to next years taxes.
Once you make this choice then the refund amount applied will show up on Line 36 of page 2 of 1040 for the tax return you are filing(Example 2021)
