How flexible is your state on applying overpayments

With the IRS if you file a return, individual or business, that shows an overpayment, and you requested on the return to apply it to the following year, if you have to amend the return that created the overpayment, the Service will usually move the overpayment back against the new deficiency if requested via Pract Hotline.

California will not do that for overpayments for which overpayments were requested on the return to be credited to next year. They consider the request on the original return to apply to next year an irrevocable choice, much the way if the wrong year voucher is used to pay an estimated tax amount. (though CA did allow a client of mine who made a huge online payment to the wrong year to correct it)

But if instead of requesting the overpayment be applied to next year for CA, you request a refund, then CA will allow you to send the check back and ask that it be applied to next year. I've never tried, but CA might allow you to send the check back and ask that it be applied to the balance due on the revised/amended original return.o

How does your state respond to requests to apply overpayments that on original returns were requested to be applied to next year, you request that they be applied to deficiency on amended returns for that year. All of this before the initial due date for the subsequent year return.

California will not do that for overpayments for which overpayments were requested on the return to be credited to next year. They consider the request on the original return to apply to next year an irrevocable choice

It's not that "they consider" the request to be irrevocable, but rather, that's what the law states, which they are following. See Sec. 19002(e) of the Revenue & Taxation Code:

(e) If any overpayment of income tax is claimed as a credit against estimated tax for the succeeding taxable year, that amount shall be considered as a payment of estimated tax in accordance with Section 19007, for the succeeding taxable year, and no claim for credit or refund of the overpayment shall be allowed for the taxable year in which the overpayment arises.

This is the same language as Sec. 6513(d) of the IRC. But the IRS has adopted Policy Statement 3-14 stating that it will allow a taxpayer to change the election upon a showing of “undue financial hardship.” See IRM 1.2.12.1.14. Evidently, from what you say, California hasn't adopted such a policy.

They consider the request on the original return to apply to next year an irrevocable choice, much the way if the wrong year voucher is used to pay an estimated tax amount.

I don't see those two situations as being very similar. The first is a deliberate, considered choice; the second sounds like a simple error.

It seems to me dave829 has nailed it, legally. Stepping outside of strict interpretation of the law, is it fair? Yes, it is. Holding the over-payment, applied as an estimated payment, as an "open option" to apply to a balance due, just in case you made a mistake, gives you an unfair benefit compared to other taxpayers who constructively receive their refunds.

you request a refund, then CA will allow you to send the check back and ask that it be applied to next year.

What if the refund was direct deposited? I wonder why taxpayers who burden the system by requesting paper checks should get a special break?

How does your state respond to requests to apply overpayments that on original returns were requested to be applied to next year, you request that they be applied to deficiency on amended returns for that year.

I share your curiousity. Perhaps a poll? The next question is, does it really matter for California purposes, what other states do?

All of this before the initial due date for the subsequent year return.

Not sure that has any bearing, legally or fairness-wise.

makbo, it doesn't have any bearing on other states how CA handles requests to move overpayments backwards. I was asking because I have clients who file in other states.

dave829, the irm cite good to know. Haven't had to ask the IRS more than a couple of times over the years, but Pract Hotline never refused or asked for proof of hardship.