In general, the advice given is correct for the general
situation. There are a couple of places where foregoing the
use of the money may be a superior strategy.

If you anticipate a large one-time income boost next year,
leaving the money with the IRS may be a safer choice. The
best example is perhaps exercise of company stock issues
which leave a profit which must be declared as ordinary
income. Depending upon the rest of your financial situation
-- and this is really somewhere that you should seek
professional advice, rather than relying on general comments
from a newsgroup -- this may or may not be an appropriate
option.

If you anticipate about the same level of income next year,
and you expect that your withholding will once again exceed
your final tax liability, then the advice given elsewhere in
this thread is probably completely appropriate.

Hank Murphy
speaking only for myself

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- quote -

This problem can be avoided by asking to have most of the
overpayment credit elected and small part, perhaps $50 or
$100, refunded. Your receipt of the refund is an implied
acknowledgement that the rest of the overpayment was credit
elected.

Frederick Lorca

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Kalyan" <san.kalyan[at]gmail.com> wrote:

- quote -

It's not that complicated. This year's refund is simply
included in the "Taxes paid" part of your 2007 return, just
like the witholding and estimated tax payments you make this
year. If your taxes paid are greater than the total tax you
get a refund, if they're lower then you owe (and if they're
too much lower, and you don't meet the safe harbor rule, you
also owe a penalty).

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

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"Kalyan" <san.kal...[at]gmail.com> wrote:

- quote -

Mathematically, that is correct. However, consider what you
are doing with your money. First, you "earned" a refund for
2006 by having too much money withheld and given to the
Treasury to hold (at no interest). Now, you want to let them
continue to hold your money while also continue to be
overwithheld for TY 2007, creating an even bigger refund
next year. Remember, the Treasury does not pay interest on
these overpaid funds. Financially, you would be just as well
off taking the refund and stashing the money in your
mattress!

If you apply this year's refund to next year, then you
should REDUCE your withholding during the year, so that you
neither owe or get a large refund next year. That would give
you more in your weekly/ monthly paycheck all through the
year.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Kalyan" <san.kal...[at]gmail.com> wrote:

- quote -

Mathematically, that is correct. However, consider what you
are doing with your money. First, you "earned" a refund for
2006 by having too much money withheld and given to the
Treasury to hold (at no interest). Now, you want to let them
continue to hold your money while also continue to be
overwithheld for TY 2007, creating an even bigger refund
next year. Remember, the Treasury does not pay interest on
these overpaid funds. Financially, you would be just as well
off taking the refund and stashing the money in your
mattress!

If you apply this year's refund to next year, then you
should REDUCE your withholding during the year, so that you
neither owe or get a large refund next year. That would give
you more in your weekly/ monthly paycheck all through the
year.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

- quote -

2006 tax liability = $10,000
2006 payments = $12,000
2006 overpayment = $2,000 (credit elected to 2007)

2007 tax liability = $11,000
2007 payments = $14,000 ($12,000 withholding + $2,000 credit
elect from 2006)
2007 overpayment = $3,000

You would be entitled to a refund of the $3,000, or you can
elect to have some or all of it credit elected to 2008.

Frederick Lorca

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Kalyan" <san.kalyan[at]gmail.com> wrote:

- quote -

I have done that, many years ago and it left me very uneasy.

Why? Well, when I owe additional tax, my cancelled check is
proof to me that the IRS received my forms and payment. If
I am due a refund, the IRS's check (or direct deposit) to me
is proof that they received my tax forms. If I ask for a
refund to be applied to next years tax, I receive no
conformation what-so-ever that they even received my tax
forms.

Come next year, I file my taxes assuming they applied my
refund and file it. If something went wrong with the first
refund and it didn't get properly applied to next years
taxes it will take much more effort to fix last years
problem than it would have taken to simply have had the
refund sent to me so I know I received it.

That way I never have this years taxes depending on what
happened last year.

--
-Ernie-

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I am wondering what would happen if I apply this year's tax
refund to next year. I realize that I will not get any
refund this year if I do this. If I get a refund next year
when I do taxes this refund will be applied to it and I will
get the total refund, is that correct?

TIA

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >