You Have the Option to Apply Your Refund to the Following Year’s Tax Return.
When it comes to filing taxes, there are just three alternatives. Either you pay taxes, break-even, or the IRS gives you a refund. If you get a refund, your accountant or tax software can ask, “Do you want to apply your refund to next year’s return?” Continue reading to learn more about your alternatives.
Many taxpayers choose to have their refund deposited directly into their account or mailed to them. Some taxpayers go a different route, electing to put their tax refund to next year’s estimated taxes, either in the first quarter or throughout the year.
What Does “Apply Refund to Next Year’s Return” Mean?
It means that instead of receiving your refund in the form of a direct deposit or a check, you choose to put it to the next year’s taxes. This option is appropriate if you estimate your taxes to be much higher next year and believe it is preferable to pay those taxes by applying for a refund rather than receiving a refund and resubmitting it to the IRS as an Estimated Payment.
Why would I want to use my return to pay my taxes for the following year?
Applying your refund to the following year is the greatest option if your current year’s income was lower or you overpaid your estimated taxes.
This option is handy if you expect your taxes to be much higher next year (due to increased income) and believe it is preferable to pay those taxes by applying for a refund rather than receiving a refund and then resending it to the IRS as an estimate.
How can I tell if I used my previous year’s refund to pay my current taxes?
Are you attempting to figure out if you used your tax refund from last year to pay your taxes this year?
If you’re filing your taxes for the year 2021, look at page 2 line 36 of your 2020 federal return. It will state how much, if any, was carried over to the current year (2021)
How can I switch from applying an overpayment to the following year to receiving an instant refund?
If you’re filing your current year’s tax return, your tax accountant or software will ask if you want to collect your refund or apply all or part of it to next year’s taxes. You can choose to accept your refund rather than apply for the next year.
If you have already submitted your tax return, you may need to contact the IRS to receive a refund. Customer assistance can be reached at 800 829 1010.
How do I apply a tax refund to the following year’s taxes?
“Do you want to apply your tax refund to next year?” your accountant or tax software will ask. If you choose Yes, your refund will be credited to your taxes for the next year.
Once you’ve made this decision, the amount of the refund will appear on Line 36 of Page 2 of Form 1040 for the tax return you’re submitting (Example 2021)
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