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Is there a way to refund an overpayment applied to estimated taxes without amending the return in CA (Form 540)?

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Level 1
last updated ‎December 07, 2019 7:32 AM

Client wanted California overpayment applied to estimated taxes but then lost the contract position and does not foresee getting a new position in 2019. As such, client will likely not owe much, if any, tax for 2019 and would like to get the overpayment refunded. 

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Level 15
last updated ‎December 07, 2019 7:32 AM

No, you can't, period.  CA statute does not permit refund or adjustment of credit elect for current year estimated tax from prior year overpayment.  See RTC §19002(e).

IRC §6402 and its regulations are not explicit but there doesn't seem to be any support for a refund claim either.  The best guidance can be found in IRM 20.2.4.8.5, which states the following [emphasis added]:

"If the taxpayer requests permission to change a credit elect to a refund, Policy Statement 3-14 in IRM 1.2.12.1.14 provides, "When an income tax overpayment is elected for credit to estimated tax for the following year, it must be so applied. If the taxpayer wishes to change his or her election (after the filing of the overpayment return) in order to have the overpayment refunded, the refund may be made only upon showing that the taxpayer would suffer undue financial hardship. Refunds in such cases will be limited to individual taxpayers whose requests are submitted far enough in advance to permit refund to be made prior to the end of the taxable year to which the credit was applied. Interest will not be allowed on the overpayment for the reason that the IRS was precluded from making the refund within the usual 45-day interest-free period."

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Highlighted
Level 15
last updated ‎December 07, 2019 7:32 AM

No, you can't, period.  CA statute does not permit refund or adjustment of credit elect for current year estimated tax from prior year overpayment.  See RTC §19002(e).

IRC §6402 and its regulations are not explicit but there doesn't seem to be any support for a refund claim either.  The best guidance can be found in IRM 20.2.4.8.5, which states the following [emphasis added]:

"If the taxpayer requests permission to change a credit elect to a refund, Policy Statement 3-14 in IRM 1.2.12.1.14 provides, "When an income tax overpayment is elected for credit to estimated tax for the following year, it must be so applied. If the taxpayer wishes to change his or her election (after the filing of the overpayment return) in order to have the overpayment refunded, the refund may be made only upon showing that the taxpayer would suffer undue financial hardship. Refunds in such cases will be limited to individual taxpayers whose requests are submitted far enough in advance to permit refund to be made prior to the end of the taxable year to which the credit was applied. Interest will not be allowed on the overpayment for the reason that the IRS was precluded from making the refund within the usual 45-day interest-free period."

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