Iowa Administrative Code › Agency 701 - Revenue Department › Title VI - Corporation Income Tax › Chapter 505 - Estimated Tax for Corporations › Rule 701-505.6 - Overpayment of Estimated Tax

Current through Register Vol. 47, No. 3, July 24, 2024
(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: Corporation 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 50 percent of the
				  federal income tax refund received 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 Corporation 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: Corporation X 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, X determined that it had failed to claim a deduction on
				  the return for depreciation on some business equipment it acquired in tax year
				  ended September 30, 1995. Therefore, X filed an amended Iowa return for tax
				  year ending September 30, 1995, on July 15, 1996, showing an overpayment of
				  $700 and a credit to estimated tax of the same amount. X's amended return was
				  filed on or before September 30, 1996, so the $700 credit to X'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 X's original return would have been
				  applied to X'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 X 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: Corporation 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 Corporation Z's 1994 return it was determined that
				  Corporation 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
				  Corporation Z's estimated tax for 1995.