Assuming USA federal taxes...
- 2017 - I prepay estimated taxes of $1,000 on 1st of each month (total: $12,000).
- 2018 - Jan, Feb, Mar, Apr, I prepay $1,000 on 1st of each month (total: $4,000).
- 2018-Apr-15 - Taxes come to an owed balance of $13,000.
Will IRS deduct $13,000 from the total balance of $16,000, leaving $3,000 for 2018, or is the 2018 prepay of $4,000 special (in some way) and must only apply to the 2018 tax year?
I would imagine that the IRS has a single "bucket" for any/all payments that come in that is used each time an amount is owed.
The reason this all seems strange to me, is when/how is a tax refund issued? If there's simply one bucket, then how does IRS know not to refund the $3,000 which was intended as prepay for 2018?
(Followup: Do federal and state handle this the same way?)