By mistake, did you pay your estimated taxes twice? Don’t Stress!
Without precedent for my life, I unintentionally paid my assessed burdens two times. Assuming that you at any point do likewise, I need to impart to you what occurs straightaway and when you’ll get your excessive charge back.
Primary concern: Don’t stress excessively. You’ll ultimately get your cash back in six weeks or less.
How Is It Possible That I Accidentally Paid My Taxes Twice?
My unintentional double tax payment was caused by new software and user error. You are unlikely to ever unintentionally pay taxes twice if you file your taxes manually.
As I’ve done every year since 2002, I chose to do my own taxes online this year. Using tax software simplifies filing. And you become fairly proficient at it after 20 years of practise.
I enjoy staying current on tax legislation so that I may minimise my tax liability. I also enjoy the discomfort of paying taxes since it tells me how much I should work throughout the coming year.
I estimate my projected investments in passive income for the upcoming 12 months each time I prepare my own taxes. Your need to monitor your investment income and dividends to control your tax burden increases as your investment portfolio grows.
Finally, it feels good to aid your fellow citizens when more than half of working Americans do not pay federal income taxes. At the same time, you want to relax more the more taxes you pay over a certain acceptable threshold. A 25% effective tax rate is what I consider to be appropriate.
A CPA Was Paid To Examine My Work
If you file your own taxes, you almost certainly made a mistake. So this year, I made the decision to spend an extra $200 to have my taxes reviewed by a CPA who was hired by the tax software company I used. However, this option was not made voluntarily at first.
You see, if there was a figure in Box 11 of a K-1 form, the internet software wouldn’t let me continue doing my own taxes. Additionally, I had various K-1 forms with a figure in Box 11 because I invest in numerous private funds and investments.
I cooperated with the entrapment instead of complaining about this flaw, which is essentially a feature to increase revenue for the tax software company. It was important to take a closer look at my expected $20,000 extra federal income tax obligation (on top of what I had previously paid throughout 2021). Maybe hiring a CPA for $200 would help me uncover some mistakes, cut my tax bill, and at the very least input several K-1s for me.
I therefore made a $200 payment, mailed the IRS $20,000 in anticipated tax, and requested an extension. Because I was awaiting two further K-1s, I was unable to file my official taxes. In August, when the K-1s had finally arrived, I uploaded them online and had a CPA input the information and evaluate my taxes.
Surprise Tax Savings
The dashboard said that I owed an estimated $13,372 instead of the $20,000 I had paid in April after the CPA had reviewed my work. Hooray! The two K-1s that were still outstanding either reduced my taxable income or I erred.
Whatever the source, I didn’t check it out because I was so relieved to have finished the procedure. I also made the decision to always pay an additional $200 to have a CPA check my taxes going forward.
It sounded fantastic to receive a $6,600 federal return in addition to a $600 state refund. I simply filed my taxes online by pressing a few buttons.
Final cost was double
I received this message, and then horror overcame me.
“SAM, good news! Your federal taxes for 2021 are finished. Your bank account will be debited on August 16, 2022, for the outstanding sum.
I ended myself paying an additional $13,372 in federal income taxes as well as an additional $1,300 in state income taxes, as opposed to automatically receiving a $6,600 federal and $600 state refund! The software was unaware that I had already paid $1,900 in state expected taxes as well as $20,000 in federal estimated taxes in April.
A page asking how much in estimated taxes I had already paid should appear when I was doing my taxes, ideally. The software would then pay the difference, if any, once I entered the amount. There was no box, though. I therefore merely believed that as I had originally paid my projected taxes via the tax software, it would be aware of this.
I asked the CPA how I might have avoided this scenario, and she advised me to have told her how much tax I had already paid. She would have then deleted the connection between my automatic electronic payment profile and my checking account.
She told me not to worry when I inquired about what would happen to my additional cash. In the worst case scenario, the IRS would apply the amount toward my estimated tax payment for the next year.
That wasn’t a sufficient response. I called the IRS at 1-800-829-1040 because I needed my money back as soon as possible.
The IRS’s Policy Regarding the Treatment of Tax Overpayments
An unenthusiastic woman answered the phone after an hour of waiting for me to connect. She responded that any tax overpayments to the IRS would be repaid within six weeks of the IRS accepting your tax filing after I explained the scenario. Even if you receive an email message that the IRS has accepted your tax filing after you file online, it still takes a few days.
I enquired of the IRS representative if they had my bank information so I could get a credit electronically. Yes, she replied. After all, I paid my anticipated tax electronically to the IRS.
But in the end, I received both my federal tax refund and my California state tax refund in the mail. Two weeks after I filed my taxes, I received my refund from the state of California. Three weeks later, the federal and state tax refund arrived.
So, whenever you file your taxes, make sure to include the correct mailing address. If you don’t want the IRS to know where you live or where you work, don’t just use any random mailing address.
You Are Not At Risk From The IRS
Although the IRS may seem like a big corporation whose data may easily go missing, you have both paper and electronic records of your payments, so this won’t happen.
The IRS will eventually cancel a physical check and send a replacement if it is lost in the mail and isn’t cashed. You’ll just have to keep calling them if you somehow never receive your refund. Because you initially made a payment, they already have all of your personal information.
In the worst case scenario, you should be able to claim a tax credit for the omitted refund for the following tax year. The IRS is not trying to steal from you. It is aware that the tax code is complex and that mistakes and overpayments and underpayments occur frequently. I’ve already had phone conversations with a few IRS agents. Each of them has been useful in addressing my inquiries.
You will receive your tax refund eventually.
Recap of My Estimated Taxes I Paid Twice
- Always pay your estimated taxes before the due date, which is often between April 15 and April 18.
- After the IRS accepts your tax return, you will receive a refund if you paid more in anticipated taxes within six weeks.
- A 5% underpayment penalty, up to a maximum of 25%, may be assessed if you pay less in estimated taxes. For instance, if your payment was off by $2,000, you may be subject to a $100 to $500 fine.
- If your AGI for the prior year was more than $150,000, you must pay the lesser of 110% of that year’s taxes or 90% of this year’s taxes in order to avoid paying an underpayment penalty. The safe harbour rule is presented here.
- Make sure your banking information is not connected to the tax software for an automated debit once you file your taxes in order to prevent paying your taxes twice electronically. If you are filing electronically and your dashboard indicates that you are due a refund, linking your banking information is essential.
- Make sure you have the IRS’s correct postal address as well to ensure you receive your tax refund. You can receive a refund from the IRS either as a paper cheque in the mail or as an electronic credit.
- Before making a tax payment, make sure you have enough money in the linked bank account.
- Tax filing deadlines are October 17 if you want an extension.
There you have it, then! I hope you don’t make the same error I did and unintentionally pay your taxes twice. You should ultimately receive a refund, though, if you do.
Always keep at least six months’ worth of cash on hand.
The realisation that I had paid an additional $13,372 in federal taxes after paying $20,000 in taxes earlier in the year shocked me because I had been anticipating a federal refund of at least $6,600. Fortunately, I had enough money in my linked bank account to make up for the damage.
I was confident that the IRS would honour its obligation to repay my money. Actually, I was more interested in seeing how everything would turn out so I could write this post!
But if my account had been devoid of money, I would have been anxious. When bills are typically due in four weeks or less, having to wait up to six weeks to receive my refund would have been inconvenient. What would I do about my mortgage? Was I to ration out our meals? What would my healthcare provider charge me for a late payment? The inquiries would keep coming.
By mistake, did you pay your estimated taxes twice? Don’t Stress!
Financial Samurai published this on 09/08/2022. 8 Comments
I unintentionally paid my estimated taxes twice for the first time in my life. I want to tell you what occurs next and when you’ll get your overpayment returned in case you ever do the same.
In conclusion, try not to worry too much. Within six weeks, you’ll eventually receive your money back.
0 unexpected bill with savings.