Filing Extension 4/15 - overpayment applied as Q1 estimate - Spidell

Filing Extension 4/15 – overpayment applied as Q1 estimate

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Message Board Filing Extension 4/15 – overpayment applied as Q1 estimate

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    • #298022
      Robert Johanson
      Participant

      In cases where client clearly has an overpayment on the 2020 return which is more than adequate to cover the 2020 1st quarter estimate and we will apply that refund to cover that 1st quarter payment as well as subsequent payments, if we file the extension by 4/15, (without making a payment because none is needed) will that refund be considered timely made (applied) by IRS because we filed the extension by 4/15 ?  Related question:  would it not be if we filed the extension on 5/17 ?  Either way IRS has possessed the funds used to make the estimated payment since no refund will be requested when the return is ultimately filed by the extended due date.  This has always been allowed in the past in circumstances where taxpayer has a refund and applies to the subsequent year.   Does anyone know if this year is any different ? Doesn’t seem like it should be.

    • #298044
      Lynn Freer
      Participant

      We don’t have guidance on this but it appears that the overpayment will not be credited until 5/17 so there could be one month of underpayment.

    • #298075
      Robert Johanson
      Participant

      That sounds very unfair but not surprising Lynn.  What about having clients file an extension by 4/15 with an intentional overpayment intended to create an overpayment to be applied as a 1st quarter estimate when the return is later filed ?  That should be acceptable and the payment applied back to the4/15  date of payment even if the return is filed by extended due date shouldn’t it ?  That’s always been an acceptable work around and eliminated the need to make a separate stand alone 1st quarter payment for the subsequent year that could only be applied to that subsequent year.   What do you think ?  Should we still have clients make a stand alone 1st quarter payment and not make it part of an early filed 4/15 extension ?

      Thanks for y0ur thoughts.

    • #298236
      Lynn Freer
      Participant

      That should work.

    • #298242
      Robert Johanson
      Participant

      Just got off the AICPA Town Hall series weekly webinar on all things Covid Relief and AICPA is saying only  sure way to ensure that client gets timely credit is to make the stand alone 1st quarter estimate.

    • #298302
      Mark Bole
      Participant

      only sure way to ensure that client gets timely credit is to make the stand alone 1st quarter estimate.

      And that is certainly not a hardship for anyone.  The idea of deliberately overpaying the extension balance due in order to make a Q1 estimate is a little trick that only benefits the tax preparer who can’t take the time to do proper tax planning for their clients.

    • #298303
      Robert Johanson
      Participant

      No disrespect Mike but I do plenty of proper tax planning for clients and this technique is, and has been practiced by many for years and makes sense since it requires only a single payment and provides flexibility for clients who may have some uncertainty with respect to their current year’s liability due to hedge fund investments, etc. who provide no interim data.  Maybe you don’t have many of those but we do.

    • #298315
      Mark Bole
      Participant

      Maybe you don’t have many of those but we do.

      I have had clients who have had to make six-figure quarterly estimated payments, which is why I understand how it works.

      You can always make a 4/15 payment based on the prior year, and then make up the difference on the 5/17 extension, it will amount to all of 0.0025 interest charge on the difference.

    • #298316
      Robert Johanson
      Participant

      You know best Mike.

    • #298360
      Mark Bole
      Participant

      Should we still have clients make a stand alone 1st quarter payment and not make it part of an early filed 4/15 extension ?

      Both Lynn Freer and I agree with this.  You think “That sounds very unfair “.

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