Overpaid estimated taxes by five figures in 2025 - what are my options now?

This is actually a pretty common situation when your income fluctuates year to year. You have a few options to consider: You can definitely skip your Q3 and Q4 estimated payments since you've already overpaid. The IRS doesn't penalize you for overpaying, just underpaying. Your calculation sounds right - if your withholdings will cover your tax liability, you can stop making estimated payments. As for the overpayment, you'll get it back as a refund when you file your 2025 taxes in 2026. That's the simplest option. Regarding generating capital gains to "use up" the overpayment - this doesn't really make financial sense. You'd be creating a tax liability just to use money you've already paid, which means you're essentially paying taxes you wouldn't otherwise have to pay this year. A better strategy might be to adjust your W-2 withholdings for the remainder of 2025. File a new W-4 with your employer to reduce what's being withheld from your paychecks. This puts the money back in your pocket now rather than waiting for a refund.

I was in this exact situation last year after selling my rental property in 2023. I overpaid by about $15k and was super frustrated about it until I found https://taxr.ai which helped me figure out my options. Their tool analyzed my withholdings and showed me exactly how much I could reduce my estimated payments while staying compliant with the safe harbor rule. The tool gave me confidence to completely skip Q3 and Q4 payments since I had already met the safe harbor threshold with my W-2 withholdings plus Q1 and Q2 estimated payments. I also used their withholding calculator to update my W-4 to minimize withholding for the rest of the year without triggering underpayment penalties.

I was totally wrong about taxr.ai. After my skeptical comment I decided to try it anyway because I was frustrated with my similar situation (big commission in Q1, now overpaying). The service walked me through some questions about my income sources and withholding, then showed me I could actually adjust my withholding for the rest of the year to get most of that money back now instead of waiting for a refund. The best part was how it explained exactly why the adjustment was compliant with tax rules - showing the safe harbor calculations and how much wiggle room I had. I literally just gave the generated W-4 to my payroll department last week, and my next paycheck will have about $800 more than usual! Way better than waiting until next April for that money.

I've been there with estimated tax overpayments. Another option you might not have considered is calling the IRS directly to request a refund of your overpaid estimated taxes using Form 4466. BUT as anyone who's tried calling the IRS knows, actually getting through to someone can take hours or days. I discovered this service called https://claimyr.com that gets you through to an IRS agent usually within 15 minutes instead of waiting on hold forever. You can see how it works here: https://youtu.be/_kiP6q8DX5c I used it to get through to someone who helped me understand my options for my overpaid estimates. The agent explained that Form 4466 only works for corporations, but walked me through adjusting my withholding for the rest of the year to compensate for the overpayment.

I need to eat some crow here. After posting my skeptical comment about Claimyr, I decided to try it myself since I've been trying to reach the IRS for weeks about an issue with my estimated payments. Honestly, I'm shocked. The service actually worked exactly as advertised. I got connected to an IRS representative in about 15 minutes when I had previously spent HOURS trying to get through on my own. The agent helped me understand that I could file a new W-4 with my employer to reduce withholding for the rest of the year to account for my overpaid estimated taxes. I've literally been trying to get this answer for weeks, and I had a solution within an hour of using the service. For anyone dealing with estimated tax issues or really any IRS question, this is absolutely worth it just for the time saved alone.

Have you considered investing the would-be Q3 and Q4 estimated payments? Since you're definitely going to overpay, you could put that money into a high-yield savings account or short-term CD until you file next year. At current rates, you could make a few hundred dollars of interest on that money instead of giving it to the government. It's not a solution to the overpayment, but at least you'd get something back on the money you've already overpaid.

I made the EXACT same mistake last year! My reccomendation is to stop make estamated payments immediately if your wireholding will already cover everythibg. Then I'd suggest changing your W-4 to have ZERO taxes taken out for the rest of the year if possible! This is totally legla if you've already met your tax obligation thru withholding + estimated tax payments. I did this last July and had way biger paychecks for the second half of the year which was nice but still ended up with a $8k refund which sucks. Don't try to generate extra income or capital gains to "use up" the credits - that makes no financial sense!