Besides simply receiving your refund as a direct deposit, a check in the mail, or as I-Bond purchases, you can also choose to have your refund applied to the tax on next year’s tax return. Here are a few reasons why this might be a good idea:
- You pay estimated taxes each year, and you know that your tax liability is likely to increase each year.
- You’re considering selling assets for large taxable gains that would be due with the next tax return.
- Your income varies and you cannot accurately estimate your income taxes.
In most cases, taxpayers will simply want to receive their tax refund money when they file their return. However, for taxpayers who worry whether they’ll owe extra tax each year, applying your refund to the next year’s taxes can provide a helpful cushion at tax time.
