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What Happens When You Overpay Your Taxes, And How to Get A Refund If You Do?

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What Happens When You Overpay Your Taxes, And How to Get A Refund If You Do?

Paying taxes is no easy task and requires careful planning and calculations. If this is your first time making estimated quarterly tax payments, it’s easy to miscalculate your taxes. If you don't pay the Internal Revenue Service (IRS) all the tax you owe, that's obviously a problem, but what about if you overpay the IRS? It’s common for freelancers or self-employed individuals to make an overpayment on taxes by overpaying quarterly taxes. Many people don’t know exactly how much they’ll earn in a particular quarter, and an underestimate could lead to penalties. Jobs, clients and workload can also be unpredictable, making it difficult to know exactly how much you’ll earn each quarter. There are a few steps you can take to get the most out of your estimated payments and avoid overpaying taxes.

Key takeaways:

  • You will receive an overpayment amount as a refund.
  • The IRS won’t be sending out a notification to let you know you made an overpayment on taxes.
  • Freelancers, independent contractors and gig workers need to make quarterly estimated tax payments if they meet the requirements.

Table of contents

What does overpayment mean on taxes?...Read more

Will the IRS let me know if I overpaid?...Read more

Is there a penalty for overpaying your taxes?...Read more

What are estimated quarterly taxes, and who pays them?...Read more

How to avoid overpayments...Read more

Staying organized...Read more

How to claim your estimated tax refund?...Read more

What does overpayment mean on taxes?

When you make a tax payment to the IRS, you could end up paying more than you actually owe, meaning you’ve overpaid on your taxes. The overpayment amount is what you’ll later receive as a tax refund. This can more commonly happen to freelancers or anyone in the gig economy since they are required to file quarterly estimated taxes four times a year.

Will the IRS let me know if I overpaid?

No, the IRS won’t be sending you a letter letting you know you’ve overpaid on your taxes or had too much withheld from your paycheck. It’s up to you to figure this out when you're filling out your 1040 form or reviewing your tax return, and it's up to you to let the IRS know you want the amount refunded back to you. You would, however, get a notification from the IRS if you missed out on a tax credit. The IRS system can check your tax return to see if you meet specific criteria for tax credits. So you might not have even applied for the tax credit, but you’ll receive a notice that you are owed some cash from the IRS and how much is coming your way.

Is there a penalty for overpaying your taxes?

There’s no consequence from the IRS if you overpay, although it might not sit well with you knowing that you gave more money to the IRS than was needed. The good news is that you’ll most likely receive a tax refund, so your money will be safe and sound after all. This is also the case if you're an employee, and your employer withholds too much money from your paycheck. In the end, you get the money back, but it will take some time to receive it.

What are estimated quarterly taxes, and who pays them?

Typically, when you’re employed as a W-2 worker on a payroll, your employer withholds your taxes and submits them to the relevant tax agency. When you’re self-employed or an independent contractor, you don’t have an employer to withhold your taxes. So, you’ll need to make up for this by making estimated quarterly tax payments to the IRS, if you expect to owe $1,000 or more in taxes.
Alt text: Image listing common professions paying quarterly estimated taxes including Airbnb hosts, gamers, freelancers, babysitters, delivery drivers, pet sitters, and photographers. Relevant for self-employed, 1099, and tax purposes.
You’ll need to make these estimated payments four times a year because the US tax system uses a pay-as-you-go system. You’ll also need to pay self-employment taxes, or SECA taxes, which cover your Social Security and Medicare contribution. Typically an employer will cover half of the 15.3% tax towards Social Security and Medicare. But when you’re a freelancer, self-employed individual, or you're in the gig economy, you're considered the employer and employee, making it your responsibility to cover the whole tax. Also, keep in mind the IRS quarterly payments for 2022 so you can stay on top of the filing deadlines.
Alt text: Flyfin's 2023 Quarterly Tax Due Dates - April 18, June 15, Sept. 15, Jan. 15, 2024. Important for freelancers, self-employed, and 1099 workers to know.
Navigating quarterly taxes can be a daunting task. But with the help of FlyFin and a estimated tax calculator, you’ll never have to worry about overpaying estimated taxes again. You can easily track all your income and expenses in one place, and A.I. will you help find every possible deduction, saving you time and money. CPAs are available for all your tax needs and will prepare and file an error-free tax return for you.

How to avoid overpayments

Making a mistake on your tax return is always a possibility, but if you follow some essential tips, you can avoid a tax overpayment penalty. No one wants to give more to the IRS than they have to, so taking steps to ensure this doesn’t happen should be a top priority when preparing your tax return or estimated tax payments.
Alt text: Flyfin image with text on ways to avoid overpaying taxes including staying organized, using a tax calculator, taking advantage of tax credits & deductions, and using the safe harbor rule. Helpful for self-employed, 1099, and freelancer taxes.

Staying organized

Organization is one of the most important aspects of tax filing because it helps prevent mistakes. For example, you might forget to track some of your important business expenses or keep a record of them. Leaving things like this until the last minute can be a disaster for your taxes. But FlyFin can come to your rescue with an income tracker and A.I. that keeps a record of all your business expenses in one place.

Lowering your bill with tax credits and deductions

Use a tax calculator

The safe harbor tax payment rule

How to claim your estimated tax refund?

If you realize you are owed an estimated tax refund, you’ll need to request your money back from the IRS. When filing Form 1040, you’ll need to include the address where you want your refund to be mailed. Hold tight because it could take up to 10 weeks to receive your refund. Your second option is to apply the estimated tax refund amount to your next IRS payment. You can mark whether you want to use the whole amount or just a partial payment on your tax return. Making accurate payments is vital for ensuring your money stays in your pocket. If you do end up overpaying quarterly taxes, you can breathe a little easier knowing that your money will be returned to you eventually.

Estimated Taxes Filing

1099 workers have to pay estimated taxes if they owe over $1,000 in tax. Check out the 2023 quarterly tax dates and which IRS form is used to pay quarterly taxes.

Tax Payment Issue

If you miss a quarterly tax payment, there are things you can do to minimize the damage. Here's how to take action now.

Estimated Taxes Filing

1099 workers have to pay estimated taxes if they owe over $1,000 in tax. Check out the 2023 quarterly tax dates and which IRS form is used to pay quarterly taxes.

Tax Payment Issue

If you miss a quarterly tax payment, there are things you can do to minimize the damage. Here's how to take action now.

Estimated Taxes Filing

1099 workers have to pay estimated taxes if they owe over $1,000 in tax. Check out the 2023 quarterly tax dates and which IRS form is used to pay quarterly taxes.

Tax Payment Issue

If you miss a quarterly tax payment, there are things you can do to minimize the damage. Here's how to take action now.

What’s FlyFin?

FlyFin is the #1 A.I.-powered tax app for freelancers, gig workers, independent contractors and sole proprietors. For taxpayers who want to save more by itemizing their deductions, and get help with quarterly taxes, FlyFin tracks all their business expenses automatically using A.I. to find every possible tax write off and helps them be prepared for quarterly estimated taxes. Then, FlyFin's CPA team files a guaranteed 100% accurate tax return for you – to save you a couple of thousand dollars and a ton of time on your taxes. Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving more money on your taxes than last year, guaranteed.
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