(1)
Refund of overpayment of estimated tax. Any overpayment of
estimated tax, at the taxpayer's election, of $5 or more will be refunded with
interest without a claim for refund being filed. If the overpayment is less
than $5, it will be refunded only if the taxpayer files a claim for refund
within 12 months after the due date of the return.
(2)
Interest on refunds of
overpayments of estimated tax. Interest begins to accrue on the first
day of the second calendar month following the date of payment or the date the
return was due to be filed, or was filed, whichever is the latest. The rate of
interest shall be that set forth in rule
701-10.2 (421).
(3)
Credit to next year's
tax. In lieu of claiming a refund, the taxpayer may elect to have the
overpayment credited to the next year's tax liability. The election may not be
changed after the due date for filing the return considering any extension of
time to file. If the taxpayer elects to have the overpayment credited to the
next year's tax liability, the overpayment will be credited to the first
installment if the overpayment arose on or before the due date of the return.
If the overpayment arises after the due date of the return, the overpayment
will be credited to the first installment due after the date of payment. The
taxpayer may by a written election included with the filing of the return elect
to have the overpayment credited to a different installment. Revenue Ruling
84-58.
This subrule is effective for tax years beginning on or after
January 1, 1984.
(4)
Estimated tax carryforwards and how the carryforward amounts are
affected under different circumstances.
a. Estimated tax carryforward and how the
amount of carryover credit is affected by error on return. If a state return is
timely filed with an overpayment shown on the return and the overpayment is to
be credited to the taxpayer's estimated payments for the following year, the
amount credited to estimated payments will be affected by an error on the
return. Thus, if the error on the return is corrected and results in a smaller
overpayment than was shown when the return was filed, the credit to estimated
tax from the return will be reduced accordingly.
Example: Financial Institution X filed its 1994 return on
April 20, 1995, showing an overpayment of $400 and a credit to 1995 estimated
tax of $400. During processing of the return, it was determined that interest
from municipal bonds was subtracted from net income instead of being added to
net income. Correction of this error resulted in an overpayment of $200 instead
of $400. Thus, the amount credited to the taxpayer's estimated payments for
1995 was $200 instead of the $400 shown on the return form. The department
notified Financial Institution X of the error and advised that only $200 was
being credited to the taxpayer's estimated tax for 1995 instead of the $400
shown on the return.
b.
Estimated tax credit carryover, the carryforward amount affected by amended
return. A taxpayer timely files an original return with an overpayment and with
the overpayment credited to the following year's estimated tax payments. If the
taxpayer files an amended return correcting an error on the original return and
with a different amount credited to estimated tax than on the original return,
the credit amount from the amended return will be credited to estimated tax, if
the amended return is filed before the last day of the following tax year.
Thus, if an amended return for tax year ending September 30, 1995, is filed by
September 30, 1996, the amount shown as a credit to estimated tax from that
amended return will be the amount credited to the taxpayer's September 30,
1996, estimated tax, instead of the amount credited from the original September
30, 1995, return.
Example: Financial Institution Y filed its original September
30, 1995, return on January 15, 1996, with an overpayment of $500 and all of
the overpayment credited to its estimated tax for the tax year ending September
30, 1996. Later, in 1996, Y determined that it had failed to claim a deduction
on the return for depreciation on some business equipment it acquired in tax
year ending September 30, 1995. Therefore, Y filed an amended Iowa return for
tax year ending on September 30, 1995, on July 15, 1996, showing an overpayment
of $700 and a credit to estimated tax of the same amount. Y's amended return
was filed on or before September 30, 1996, so the $700 credit to Y's estimated
tax for tax year ending September 30, 1996, from the amended return was
allowed.
Note that if the amended return had not been filed until
sometime in October 1996, the credit from Y's original return would have been
applied to Y's estimated payments for tax year ending September 30, 1996. Since
the amended return would have been filed too late for purposes of crediting the
overpayment to the taxpayer's estimated tax for the next year, the department
would issue Y a refund of $200 which is the portion of the overpayment from the
amended return that had not been credited to estimated tax from the original
return for tax year ending September 30, 1995.
c. Estimated tax carryforward and how the
amount of carryover credit is affected by state tax liability or other state
liability of the taxpayer. A taxpayer who files an Iowa return with an
overpayment shown on the return and elects to have the overpayment credited to
the taxpayer's estimated tax for the next tax year will not have the
overpayment credited to estimated tax, if the taxpayer has tax liabilities or
other liabilities with the state that are subject to setoff. Other liabilities
with the state that are subject to setoff are those liabilities described in
Iowa Code section
8A.504. These liabilities are
for district court debts, and any other debts of the taxpayer with a board,
commission, department, or other administrative office or unit of the state of
Iowa.
Example: Financial Institution Z filed its 1994 Iowa return
in April 1995 showing an overpayment of $400 and a credit to 1995 estimated tax
of $400. During processing of Financial Institution Z's 1994 return it was
determined that Financial Institution Z had a liability of $150 from its 1993
Iowa return. Thus, $150 of the 1994 overpayment was offset against the tax
liability from the 1993 return. The remaining portion of the 1994 overpayment
of $250 was credited to Financial Institution Z's estimated tax for
1995.
(5)
Accrual of interest on an assessment of additional tax. If the
taxpayer has not elected to have an overpayment credited to an installment
other than the first installment, interest shall accrue on an assessment of
additional tax as follows. If the overpayment was credited to the first
installment, interest on an assessment of additional tax shall accrue from the
due date of the return. If the overpayment was credited to an installment due
after the overpayment arose, interest shall accrue from the date the return was
filed. Interest on that portion of an assessment greater than the overpayment
shall accrue from the due date of the return.
If the taxpayer has elected to have an overpayment of
estimated tax credited to an installment other than the first, interest shall
accrue on any assessment of additional tax up to the amount of the overpayment
from the date the return was filed with the department. Interest on any
assessment of additional tax greater than the amount of the overpayment shall
accrue from the due date of the return. Avon Products, Inc. v. United
States, 588 F.2d 342 (2nd Cir. 1978), Revenue Ruling 84-58.
This subrule is effective for tax years beginning on or after
January 1, 1984.
This rule is intended to implement Iowa Code section
422.91.
