APRIL 15th TAX PAYMENTS
I have received calls and emails from a few taxpayers that had scheduled payments for either a 2020 tax liability or a 2021 first estimate where the draft was not done. In every case the funds were available and in most cases state tax payments were scheduled for the same day and those payments were drafted. Needless to say, everyone was concerned about why the payments were not drafted and any consequences.
On the afternoon of April 22nd, the IRS finally admitted that there was a delay in processing payments requested via one of their online payment systems, which caused the payments to not be drafted. They said the issue was resolved as of April 22nd and that all pending payments were being processed.
You can understand the concern as taxpayers were worried about payments being treated as late and the ensuing penalties, interest, and notices. However, the IRS announcement said that payments will be credited as of their originally scheduled date. The IRS also said that taxpayers should not re-submit these payments. Given the lack of information for a week, some taxpayers may have resubmitted the payments they had scheduled, which may present a problem.
Unfortunately, the IRS has not given a lot of guidance if you resubmitted a scheduled payment. All they said in their notice was that extra payments should be canceled, but that must be done at least two days prior to the scheduled payment date, which has probably passed.
If you resubmitted a payment, you’ve now double-paid, so how do you get that money back? Unfortunately, there aren’t good options here. If the payment was for your 2020 tax liability, the IRS will eventually determine they received too much money toward your 2020 tax and they will refund the overpayment. That will probably take weeks though.
Worse is a double payment of your 2021 first estimate. There is no way currently to get that money back. Your best option is to reduce your second estimate, due in June, by the overpayment. If the second estimate is already set to draft, you’ll need to cancel that payment and set up a new payment for the adjusted amount. If you weren’t planning to make further estimate payments in 2021 the payment will be an additional credit toward your 2021 tax debt and that money will be there when you file your 2021 tax return next year.
Despite the issue this year, I strongly recommend you set up all tax payments electronically. I have had payments lost in the mail, and even if you have documentation to prove the payment was mailed, you still have to deal with the notice. This is the only issue I’m aware of with drafting payments. Most taxpayers choose direct deposit of refunds. Whether you’re making a payment or receiving a refund, the service is free and safe.
If you have questions or need any assistance setting up or canceling a tax payment, please contact our office. As always, I am looking for article ideas that you would like me to cover. If you have an idea for a future article, or just have a topic you would like more information on, please send me an email.
At Faw & Associates, we are always available to answer any of your tax or financial planning questions. You can get more information on this or many other topics at our website – www.fawandassociates.com or you can contact us directly by calling our office at (336) 838-3080. You can also email me at firstname.lastname@example.org any time with your question or concern.