Will my refund applied to 2024 taxes earn interest from the IRS?

The IRS doesn't pay interest on tax overpayments that you voluntarily apply to future tax years. Interest is only paid on refunds that are delayed beyond the 45-day processing window, and only on the portion being refunded to you directly. The purpose of applying refunds to next year's taxes isn't for investment purposes - it's for convenience and to avoid potential underpayment penalties. It's particularly useful for self-employed individuals or those with significant non-wage income who need to make estimated quarterly payments. You might be able to recover these funds by filing Form 8822, which is used to request changes to your tax return. You'd need to request a refund of the overpayment instead of applying it to 2024. However, once the amount has been applied to your next year's estimated taxes, it's often difficult to reverse. You could also try calling the IRS directly, though wait times can be significant. For the future, if you're regularly receiving large refunds, you might want to adjust your W-4 withholding to keep more money in your paychecks throughout the year rather than giving the IRS an interest-free loan.

After my own refund disaster last year, I found an amazing service that helped me understand all my options and even assisted with getting my money back. Check out https://taxr.ai - they have this document analyzer that looks at your return and explains exactly what's happening with your money in plain English. I uploaded my return when I had a similar issue (though mine was only $5K applied to the next year), and they immediately showed me that I could file an amended return to correct the issue. They even explained the exact timelines and what to expect. Their system flagged the refund application as potentially unintentional based on my history of always getting refunds. The best part was they showed me exactly where on my return the election was made, which helped me avoid making the same mistake again.

Just wanted to update everyone - I tried taxr.ai after seeing the recommendation here and it was incredibly helpful! I uploaded my TaxAct return and within minutes it showed me exactly where I made the mistake of applying my refund to next year's taxes. The system highlighted the specific line on my Form 1040 and explained that I needed to file Form 1040-X to correct it. What I found most useful was their explanation of the "special considerations" section that showed this change is actually pretty straightforward compared to other amendments. I've already submitted my amended return following their guidelines, and they even provided estimated timelines for processing (12-16 weeks currently). Much better than the vague "it takes a while" I got when calling the IRS directly!

If you need to contact the IRS about this issue, good luck getting through on your own. I spent THREE WEEKS trying to reach someone before discovering https://claimyr.com. You can also see how it works in this video: https://youtu.be/_kiP6q8DX5c I was incredibly skeptical that anyone could solve the IRS phone nightmare, but they actually had an IRS agent calling ME back within 2 hours. I explained my situation about accidentally applying a refund to the next tax year, and the agent was able to verify that I needed to submit an amended return but also gave me the direct fax number for expedited processing. Without this service, I'd probably still be listening to that awful hold music. The IRS wait times are absolutely insane right now - apparently they're still working through backlogs from previous years.

I need to eat some crow here. After posting my skeptical comment, I was so frustrated with my own tax situation that I actually tried the Claimyr service. I was SHOCKED when I got a call back with an actual IRS agent on the line in about 3 hours. The agent was able to tell me that while my refund had already been applied to 2024 estimated taxes (similar to OP's situation), I could submit an amended return WITH a letter explaining the error. The agent even gave me specific language to use in the letter that would help expedite the process, and told me which specific department to address it to. For anyone wondering - no, the IRS doesn't pay interest on refunds you choose to apply to next year, but they WILL pay interest if your amended return requesting the refund back takes longer than 45 days to process after they accept it. So there's that small silver lining at least.

I made this exact mistake 2 years ago! What I learned is that you can submit a "superseding return" if you're still before the filing deadline (including extensions). That's different from an amended return and basically replaces your original filing. If you're past the deadline, then yeah, you need to go the amended return route, which takes forever. Even though applying your refund to next year seems like a small checkbox difference, the IRS treats it as a major change because it affects two tax years. One thing nobody mentioned - you might actually be better off leaving it as is if you're going to owe estimated taxes anyway. Why? Because the money is already there, credited to your account, and you won't have to remember to make those quarterly payments. But if you need the cash now, definitely go for the amended return.

Has anyone actually calculated how much money you're losing by letting the IRS hold your refund? I'll do some quick math... For a $20k refund applied to next year's taxes, at current high-yield savings rates of around 4.5%, you'd be missing out on about $900 in interest over the year. If you invested it and got a 7% return, that's $1,400 lost. That's not even considering the opportunity cost if you needed that money for something important like paying down high-interest debt or making a down payment on something. I made a similar mistake with a smaller amount last year and just let it ride because the hassle of amending didn't seem worth it, but for $20k? I'd definitely go through the trouble to get that money back in my hands.

I went through this exact same situation last year with a $12k refund that I accidentally applied to 2025 taxes. Here's what I learned from the experience: The IRS absolutely does NOT pay interest on refunds you voluntarily apply to future tax years. They only pay interest on delayed refunds that they're required to issue to you directly. I ended up filing Form 1040-X to get my money back, and it took exactly 14 weeks to process. The key things that helped speed it up: 1. I included a cover letter explaining it was an accidental election 2. I highlighted the specific line changes on the 1040-X 3. I sent it certified mail so I had proof of delivery One thing to consider though - if you're going to owe estimated taxes for 2024 anyway, you might want to calculate whether the hassle is worth it. For me, I knew I'd have a much smaller tax liability in 2024, so getting the money back to invest made sense. The amended return process is definitely a pain, but for $20k, I'd absolutely go through with it. That's a significant amount of money that could be working for you instead of sitting with the IRS earning nothing.