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My CPA has me paying quarterly taxes. I got to thinking about that. Do I have to do that or can I hang on to the money, collect interest on it and pay a large one-time sum every spring?
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My CPA has me paying quarterly taxes. I got to thinking about that. Do I have to do that or can I hang on to the money, collect interest on it and pay a large one-time sum every spring?
You are free to do whatever you want. You will owe penalty and interest on any underpayments and the interest income you receive will probably not overcome the extra you pay to the IRS/state. Each case is different, though. And, your CPA can help figure out which choice is best.My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients -
Paying estimated taxes usually happens because of significant income not being subject to withholding, or failing to withold an appropriate amount. Failing to pay estimated taxes can lead to underpayment penalties. The ways to avoid underpayment penalties include paying at least 90% of the yearly tax bill either through estimated or withholding, paying at least 100% of last year's tax bill (110% if AGI>150K) or owing less than $1000. Hopefully this helps you figure out what is best for your case.Comment
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I pay lump sum. The penalties/interest are around 1k for a 100k bill the last few years. You can also decrease the penalty by filing an irregular income form, but I havent done that as I find it easy to make more than that penalty.Comment
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I pay lump sum. The penalties/interest are around 1k for a 100k bill the last few years. You can also decrease the penalty by filing an irregular income form, but I havent done that as I find it easy to make more than that penalty.
So what do you do with the money during the year?Comment
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I pay lump sum. The penalties/interest are around 1k for a 100k bill the last few years. You can also decrease the penalty by filing an irregular income form, but I havent done that as I find it easy to make more than that penalty.
So what do you do with the money during the year?
I put most of it into muni bond funds usually. Its in with my general taxable account for now.Comment
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