2021-27: Applying 2020 overpayments to 2021 - Spidell

2021-27: Applying 2020 overpayments to 2021


On April 12, the IRS released information on its website that details the treatment of 2020 tax return overpayments that are applied to the 2021 tax year.

To the extent that an overpayment of 2020 tax is attributable to a payment made after April 15, 2021 (such as a payment made with an income tax extension after April 15, 2021, but by May 17, 2021), then the overpayment will be applied to the taxpayer’s account as of the date the payment is received by the IRS. This means these overpayments cannot be used to offset any Q1 2021 estimated tax underpayment as of April 15, 2021. Taxpayers should make their full estimated tax payment by April 15, 2021, to avoid any estimated tax underpayment penalty.

However, to the extent an overpayment on the taxpayer’s 2020 tax return is attributable to payments made on or before April 15, 2021, and the taxpayer makes a valid election to apply the overpayments to their 2021 estimated tax, then the overpayments will be applied as if paid by April 15, 2021.

This latest guidance can be found at:

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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