Yikes! I just realized that I forgot to pay the 4th quarterly installment of our 2008 estimated taxes, which were due on January 15th. After the initial panic subsided, I did a bit of digging and was relieved to find out that it’s really not a big deal. Here’s the straight dope from Fairmark.com:
Penalty for Underpayment
What happens if you don’t pay enough, or don’t pay soon enough.
If you don’t pay enough estimated tax, or don’t pay on time, you’ll have to pay a penalty. It’s best to avoid this penalty, of course â€” but you don’t have to lose sleep over it. The penalty is equivalent to nondeductible interest on the amount you underpaid, for the period of the underpayment. If you underpay only a small amount, or you correct the underpayment quickly, the penalty will be small.
Based on that, it looks like we’ll be on the hook for two days of interest, which shouldn’t be a big deal. In fact, I’ve heard that the IRS doesn’t even bother billing for this if the amount is small enough. That makes sense, I guess, as it costs them money to print and mail an invoice and then handle the payment when it comes in.
Note that you’re exempt from penalties on a late Q4 payment if you’ve already paid in at least as much as your previous year’s total tax bill, or if you file your taxes and pay the full amount due by February 2, 2009.
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