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Will the IRS/turbotax let me know how much I owe for missing est quarterly payments

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  • Will the IRS/turbotax let me know how much I owe for missing est quarterly payments

    I promise I searched through the numerous threads on the well-done topic of estimated quarterly taxes.  Sorry to add to that pile of threads.

    Planning on 110% safe harbor.  I'm all SE/1099/sole proprietor now, first job out of residency but had moderate (8k/mo) SE moonlighting income from last year. I'm DIY taxes and everything else. I made my first FY2019 quarterly payment last week, and am now "up to date" on payments. I had sort of convinced myself that I needed the extra cash up until getting my first few attending paychecks.

    Question is, will my tax software calculate the penalty I will owe for missing the first 2 dates, if any? And would the penalty be based on the 110% safe harbor, or would it be based on the amount I actually owe? I just don't want to get into a position where some time in 2021 I get a strongly worded letter from the IRS saying I owe $200 or something for underpaying throughout the year.

    Thanks for your time, and props to our wonderful tax system for creating this educational opportunity.

     

  • #2
    having used Turbo Tax, I can verify that yes...it will calculate penalties.  One year i missed June payment and there was a penalty.  And to boot I got a refund that year...it was just deducted from the refund.  I missed the payment by 7 days.  the penalty is a % of the underpayment x number of late days until it is paid.  the % used to be 5%..not sure what is is lately....  it's IRS form 2210 (which Turbo will fill out).

    here is the IRS lingo:




    Penalty figured separately for each required payment. The penalty is figured separately for each installment due date. Therefore, you may owe the penalty for an earlier due date even if you paid enough tax later to make up the underpayment. This is true even if you are due a refund when you file your tax return.



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    • #3
      There is a whole separate tax form used to calculate penalties owed on delinquent estimated payments.  It is form 2210.

      https://www.irs.gov/pub/irs-pdf/f2210.pdf

      FYI, you can increase your withholding if you have both SE and W2 wages at any point in the year, including late in the year, and that withholding counts as made equally throughout the year.  So one option is to overwithhold to compensate for underpaying estimated taxes.  This technique allows you to get out of paying any end-of-year penalties.

      You can also make a claim that the income was not even throughout the year, and this can allow waiving the penalty at times.  The rules governing this are a bit obscure to me, but my tax accountant has successfully used various different techniques to avoid penalties for estimated payments made later in the year rather than earlier.

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      • #4
        You can also just not pay it and the IRS will figure it out for you. I have definitely underpaid some years and have yet to receive a bill.

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        • #5
          FWIW for the last 3 years I have received a adjustment (CP14?) to my taxes a few weeks after I file. Sometimes I owe a little money sometimes I get a few nickels back.

          I think when your taxes reach a certain level of complexity this is probably fairly common.

          Being a few days late on a quarterly is probably just going to be a few dollars unless you are really making a ton of money.

          I don't use TT to estimate quarterlies, didn't even know this was a function.

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          • #6




            You can also just not pay it and the IRS will figure it out for you. I have definitely underpaid some years and have yet to receive a bill.
            Click to expand...


            Now that's lucky!

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