Estimated Tax: Application of Prior Year Overpayment (Refund)

# (1)

(1) Definitions for purposes of this rule:

(a) "Open estimated tax account" is an account to which estimated tax installments may be made under ORS 316.579.

(b) "Estimated tax underpayment period" is the period after the due date for the fourth estimated tax installment but prior to the due date for filing the related tax return, excluding extensions, for that period. This period is generally January 16 through April 15 (when the taxable year is a calendar year).

# (2)

(2) If a taxpayer elects on a return to have an overpayment of tax applied to an estimated tax account, the department generally will apply the overpayment to the subsequent year's open estimated tax account.

# (3)

(3) Exceptions:

(a) Before the taxpayer's overpayment is applied to the open estimated tax account, the overpayment will first be subject to offset under ORS 314.415 and related rules.

(b) If there are two open estimated tax accounts for the same taxpayer (between January 1 and January 15 when the taxable year is the calendar year), any amount requested to be applied to an estimated tax account will be posted to the tax year which is the later of the two open estimated tax accounts unless the taxpayer has requested in writing that the overpayment be applied to the earlier of the two open estimated tax accounts.

(c) If a taxpayer files a delinquent or amended return claiming a refund between the due date for a subsequent tax year's fourth estimated tax installment and the due date for filing the return for the subsequent tax year, excluding extensions (between January 16 and April 15 when the taxable year is the calendar year), any amount requested to be applied to an estimated tax account will be posted to the open estimated tax account unless the taxpayer has requested in writing to have the overpayment applied against the estimated tax underpayment period to reduce interest on any underpayment of the estimated tax liability.

# (4)

(4) Refunds from original returns. If a taxpayer requests to apply an overpayment from an original return filed on or before the return due date (including extensions), the department will apply the overpayment as of the first estimated tax installment due date of the open estimated tax account (generally April 15) or the date the overpayment was made, whichever is later.

Example 1:The taxpayer files their 2017 Oregon personal income tax return on March 31, 2018. The return shows a refund due. The payment that created an overpayment was made on January 15, 2018. The taxpayer elects on the return to have the refund applied to an estimated tax account. The overpayment is credited to the open estimated tax account as of April 16, 2018, which is the later of the due date of the first installment of estimated tax due for tax year 2018 or the date the payment creating the overpayment was made.

Example 2: The taxpayer files their 2017 Oregon personal income tax return under extension on October 12, 2018. The return shows a refund due. The payment that created an overpayment was made on July 6, 2018. The taxpayer elects on the return to have the refund applied to an estimated tax account. The overpayment is credited to the 2018 estimated tax account as of July 6, 2018, which is the later of the due date of the first installment of estimated tax due for tax year 2018 or the date the payment creating the overpayment was made.

# (5)

(5) Refunds from delinquent returns. If a taxpayer requests to apply an overpayment from a delinquent return to an open estimated tax account, the department will apply the overpayment to the estimated tax account as of the date the delinquent return is filed or the date the overpayment was made, whichever is later.

Example 3: The taxpayer files a 2017 Oregon personal income tax return late, on October 25, 2018, showing a refund due. The payment that created an overpayment was made on April 10, 2018. The taxpayer elects on the delinquent return to have the refund be applied to the taxpayer's estimated tax account. The overpayment is credited to the 2018 estimated tax account as of October 25, 2018, which is the later of the date the delinquent return was filed or the date the overpayment was made. The refund is applied to the fourth installment of estimated tax due for tax year 2018.

Example 4:The taxpayer files a 2016 Oregon personal income tax return on January 10, 2018, showing a refund due. The payment that created the overpayment was made on October 15, 2017. The taxpayer elects on the delinquent return to have the refund applied to the taxpayer's estimated tax account. As of January 10, 2018, there are two open estimated tax accounts for the taxpayer: 1) the fourth installment for tax year 2017 and 2) the first installment for tax year 2018. The refund is credited as of January 10, 2018, toward the first installment of estimated tax due for tax year 2018, due April 16, 2018. After the return has processed, the taxpayer writes to the department and requests that the 2016 refund instead be applied to the fourth installment for tax year 2017. The department moves the estimated tax payment from tax year 2018 to tax year 2017. The payment is applied as of January 10, 2018, toward the fourth installment for tax year 2017.

Example 5:The taxpayer files a 2016 Oregon personal income tax return on March 1, 2018, showing a refund due. The payment creating an overpayment was made on February 20, 2017. The taxpayer elects on the delinquent return to have the refund applied to the taxpayer's estimated tax account. The taxpayer has not yet filed their 2017 Oregon personal income tax return. The overpayment is credited consistent with section (3)(c) of this rule to the 2018 estimated tax account as of March 1, 2018. After the 2016 Oregon return has processed, the taxpayer writes to the department to indicate they would like the refund applied to the 2017 estimated tax underpayment period. The department moves the application from tax year 2018 to tax year 2017 and applies the payment as of March 1, 2018.

# (6)

(6) Refunds from amended returns. If the taxpayer elects on an amended return to have an overpayment applied to estimated tax, the department will apply the overpayment to an open estimated tax account. The overpayment shall be applied as of the date the amended return is filed or the date the payment is made, whichever is later. If interest is due on the overpayment, the interest will stop accruing on the date the amended return is filed.

Example 6:

A taxpayer files a 2017 Oregon personal income tax original return timely on March 13, 2018. The taxpayer then files a 2017 Oregon amended return on October 15, 2018, claiming a $500 overpayment and electing to have the entire refund applied to the open estimated tax account. The payment creating the overpayment was made on February 1, 2018. The refund is applied to the taxpayer's 2018 estimated tax account as of October 15, 2018, the later of the date the amended return was filed or the date the overpayment was made. Interest on the overpayment is calculated starting June 2, 2018, 45 days after the return due date (excluding extension), and ending October 15, 2018, the date the return was filed.