Comments on: Penalty for Paying Quarterly Estimated Taxes Late

By: tsk

tsk — Wed, 11 Nov 2009 17:52:18 +0000

THANK YOU SOOO MUCH FOR YOUR HELP! I’ll be mailing it in today

By: ed

ed — Wed, 11 Nov 2009 15:14:37 +0000

Don’t add any interest. They may not notice you’re late, but they will bill you for it after they get your return. You may not owe as much as you think and a small amount can usually be eliminated by completing the Annualized Income form 2210 Schedule AI.

By: tsk

tsk — Wed, 11 Nov 2009 14:54:17 +0000

so, I should pay per the voucher now and “they” will let me know what the penalty is later? Or do I need to figure 4% and add it to my payment now?

By: ed

ed — Wed, 11 Nov 2009 04:31:07 +0000

Paying an installment late produces a penalty of 4% simple interest for the time it is late.

By: tsk

tsk — Wed, 11 Nov 2009 03:44:10 +0000

So, I’m trying to figure out what to do with missing my September 15th payment and realizing now 2 months later! Do I send in the Sept 15 voucher with the total payment or skip payment and double the payment due on next payment (adding Sept & and next payments together)? HELP. I can’t believe I totally forgot about quarterly tax payments (Kentucky AND Federal)!

By: Peter

Peter — Sat, 30 May 2009 16:15:46 +0000

Yes–it’s okay to skip a payment. The penalty is basically an interest rate based on the number of days it’s outstanding. No “10% late penalty” like you get if you don’t pay taxes at all.

It’s hard to find the current rate, but someone indicated that it’s 5% now. It was 8% in 2000, so plan on 8% and you’ll be safe. In any case it’s 2-3 times the return on a money fund–so it’s best to pay quarterlies unless the money will cost you 10% or more (lost) annual interest. Paying off credit cards is clearly better than prepaying taxes.

By: me

me — Sat, 30 May 2009 07:11:52 +0000

So, it’s ok to pay the April, September, and January payments but skip June if I don’t have the money? Or if I skip one, should I skip them all because I’ll get a penalty anyway?

I’m so glad to find this discussion. I know people who have skipped ALL their quarterly payments but no one who’s had trouble paying just one.

By: Peter

Peter — Sat, 30 May 2009 06:52:05 +0000

Me–don’t pay if you can’t conveniently. You’ll pay the IRS 5-7% interest as penalty–much less than you’ll pay on your credit card.

In these times of rising stocks, I’m skipping my June quarterly payment, in favor of betting on the stock market. Of course when I did that in 2001 I lost big time…But that was an official bubble, not a recession.

By: me

me — Wed, 27 May 2009 18:03:38 +0000

OK, I owe $2200 in estimated taxes on June 15. I don’t have that money.

Should I:

1. Pay with a credit card check and get horrendous amounts of interest

2. Not pay it at all and pay the fine later

3. Pay the $1500 that I can right now and work it out later?

If I do #2 or #3, does it work out in the end? Will I just pay more in taxes on April 15?

thanks.

By: Ed

Ed — Thu, 12 Feb 2009 15:48:36 +0000

Nickel, pay your 4th quarter of 1/4 of last year’s tax late. The late interest is zilch (about 14 cents per day per $1,000 of installment amount) compared to the interest you could earn by not paying your taxes in February instead of April (also about 14 per day per $1,000 at 5%).

Also, Zach: If you owe a penalty and opt to use TT’s Annualized Income Method form 2210 Schedule AI, it will ask you for your income by quarter. Or you could download a form 2210AI calculator from the web in case TT doesn’t figure it right.

By: Zach

Zach — Sat, 31 Jan 2009 07:18:27 +0000

I have the same problem and am trying to file my income tax return (Form 1040) for 2008 by February 2, with one exception – I did not have any 1099-MISC income until the 4th quarter. I am using TurboTax and it thinks I under-paid my taxes and included a penalty. It did suggest me annualize it to reduce the penalty.

How do I make TurboTax know that I did not have any 1099-MISC income in the first 3 quarters?

Many thanks in advance!

By: My Dollar Plan

My Dollar Plan — Tue, 20 Jan 2009 17:29:58 +0000

nickel, I was going to suggest using the annualized income method, or the actual paid date method to reduce the penalty in case you paid some extra earlier in the year… but I see you were using the safe harbor, so it probably won’t help. You could always fill out the 2210 just to see if it is less.

By: Friend

Friend — Tue, 20 Jan 2009 01:09:42 +0000

The late penalty does not apply to the January 15 payment if you file your 1040 and pay any tax due by February 2. (Normally that would be January 31; but the weekend delays it 2 days.) All other payments have to have been made on time. This “exception” is only for the January 15 payment.

This information is found in 2 paragraphs on page 3 of IRS Publication 509. The first paragraph is under the January 15 date:

“Make a payment of your estimated tax for 2008 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES. This is the final installment date for 2008 estimated tax. However, you do not have to make this payment if you file your 2008 return (Form 1040) and pay any tax due by February 2, 2009.”

The second paragraph is under the February 2 date:

“If you did not pay your last installment of estimated tax by January 15, you may choose (but are not required) to file your income tax return (Form 1040) for 2008 by February 2. Filing your return and paying any tax due by February 2 prevents any penalty for late payment of the last installment. If you cannot file and pay your tax by February 2, file and pay your tax by April 15.”

Notice that the second paragraph clearly states that doing this prevents any penalty for the late payment of your January 15 estimated taxes.

So, you’re off the hook if you can file and pay by February 2! No nasty Form 2210 and no penalties!

By: nickel

nickel — Mon, 19 Jan 2009 20:13:19 +0000

Friend: How so?

By: Friend

Friend — Mon, 19 Jan 2009 18:51:37 +0000

Hello! Read IRS Pub 509. Your post and most of the comments above are based on an incorrect understanding of the law.

By: nickel

nickel — Mon, 19 Jan 2009 17:41:04 +0000

Start-Up: Correct. But… We had a major uptick in income, and I’ve only been paying enough to achieve safe harbor (i.e., an amount equal to 2007 taxes) while sitting on the difference. So for us it matters.

By: Start-Up

Start-Up — Mon, 19 Jan 2009 17:14:32 +0000

Isn’t this penalty really only an issue if your estimated tax payments don’t meet 100% of 2007’s taxes? If so, and you have already paid the amount of 2007’s taxes in the previous three quarters, then you’re off the hook.

By: Beyond Paycheck to Paycheck

Beyond Paycheck to Paycheck — Mon, 19 Jan 2009 13:34:41 +0000

You don’t have to complete Form 2210 just for this reason. If the IRS has an issue with your late payment, they will propose the interest charge to you. If you disagree, you can then fill out Form 2210 then. As anon says above, if it’s a relatively small amount for a small period, odds are that you never hear anything about it. Save your time. Form 2210 is not fun to do by yourself.

By: Stacey

Stacey — Sun, 18 Jan 2009 13:22:23 +0000

Heh. Form 2210 isn’t fun, but it’s not that bad. If you file your estimated taxes on an annualized method (for variable income), you have to use the form every year.

We use H&R Block’s free-file online, so it’s just a few more steps that the program walks us through.

By: Mary

Mary — Sat, 17 Jan 2009 21:53:48 +0000

To me, having to fill out an extra government form is penalty enough! I’d rather pay more than fill out those forms!

I’m sorry this happened to you!

By: Aaron

Aaron — Sat, 17 Jan 2009 20:10:05 +0000

Don’t sweat it, Nickel. If Timothy Geithner can get away with tax evasion and still get appointed to the top of the Treasury, then what have you and I got to worry about? Right?

By: Friend

Friend — Sat, 17 Jan 2009 19:35:15 +0000

If you file your 1040 and pay the full tax bill by Feb 2, 2009 (normally January 31, but different this year due to the weekend), you don’t have to pay a penalty. Check out page 3 of IRS Pub 509 under the January 15 heading for the calendar. This is only true for a late January 15 payment.

By: Anon

Anon — Sat, 17 Jan 2009 15:55:33 +0000

I’ve sent these in late once or twice (a day or so late, nothing huge), complete with checks that were dated late (just to show that I wasn’t trying to mislead them).

Nothing ever came of it. Maybe they realize people make mistakes?

By: mbhunter

mbhunter — Sat, 17 Jan 2009 07:49:11 +0000

I feel for you.

It’s strange. Bigger losses don’t bother me as much as these little annoying things.

By: poor boomer

poor boomer — Sat, 17 Jan 2009 05:22:08 +0000

It is my understanding that if you also have wage and/or salary income from which taxes are withheld, you can ‘catch up’ your tax payments by having additional taxes withheld by the end of the year.

Of course, you can’t use that method of catching up if your 4Q estimated tax payment is late, but you could do that for to cover taxes for the first three quarters.