Estimated Tax Payment

[Nithin]

I think I will get a penalty if I don't pay estimated taxes this year. Is it too late to do this?

Thanks,
Nithin.

 

[mugs]

Oh crap, I have to do that.

 

[Nithin]

can anyone list the steps to do this? or is it just fill a form and mail the check for federal and state ?

 

[FP]

Why do you need to pay estimated taxes?

I was told I needed to pay them a couple of years ago when I didn't pay enough in taxes the previous year. I ignored them on the advice of my tax accountant friend. He said the penalty is usually small and the interest on the amount I should have paid in estimated taxes was going to be very small and not worth the time.

Turns out when tax time came around the following year I had paid enough that year so they didn't care that I had not paid my estimated taxes.

IANATA but I believe you can't just pay a single estimated tax payment at the end of the year to "catch up.'

 

[HopJokey]

You cannot just pay a single estimated tax payment to catch up, but you can do so for the last quarter to help lessen the penalties if you expect to owe a lot. You do this by sending in a 1040-ES form for every quarter. The deadlines are around April 15, June 15, September 15 and January 15 for the 1st, 2nd, 3rd, and 4th quarters respectively. The 1040-ES form is simply a small slip with your name, address, SSN, etc. You send this slip in with a check of your payment.

So you still have time to make a payment for the 4th quarter, but will pay penalties for the 1st 3 quarters if you owe a lot without the estimated payments. This is of course for the Federal (IRS).

State by State should be similar but check your state's tax guide for exact information.

 

[Engineer]

Originally posted by: HopJokey
You cannot just pay a single estimated tax payment to catch up, but you can do so for the last quarter to help lessen the penalties if you expect to owe a lot. You do this by sending in a 1040-ES form for every quarter. The deadlines are around April 15, June 15, September 15 and January 15 for the 1st, 2nd, 3rd, and 4th quarters respectively. The 1040-ES form is simply a small slip with your name, address, SSN, etc. You send this slip in with a check of your payment.

So you still have time to make a payment for the 4th quarter, but will pay penalties for the 1st 3 quarters if you owe a lot without the estimated payments. This is of course for the Federal (IRS).

State by State should be similar but check your state's tax guide for exact information.

I don't think that's entirely true. It depends on when you receive the compensation in question. For example, if you sale a large quantity of stock in the 3rd quarter, you can pay the estimated tax payment during the 3rd quarter (actually, you are required to) for the sale. No penalties for the 1st and 2nd quarters because there was not the income requred to do so then. The IRS expects payment during the quarter that the compensation was received in. IIRC, you aren't supposed to even spread it out (i.e. if you sold the stock in the 1st quarter, you're supposed to pay during the 1st estimated payment, not during the 4 estimated payments - The IRS wants their money during the quarter of the income).

 

[kranky]

I will defer to the tax experts here, but I thought everything which was collected via payroll withholding was considered to be equally withheld throughout the year. So if you are in a position where you should have filed an estimated tax payment but didn't, you can avoid the penalty by upping your withholding for the rest of the year.

 

[Engineer]

Originally posted by: kranky
I will defer to the tax experts here, but I thought everything which was collected via payroll withholding was considered to be equally withheld throughout the year. So if you are in a position where you should have filed an estimated tax payment but didn't, you can avoid the penalty by upping your withholding for the rest of the year.

I tend to think you're right on that. If you owe less that $1,000 at the end of the year, I think the IRS pretty much doesn't say anything to you. I did it last year (with unexpected 401k money returned) and owed less than $1,000 after I adjusted my withholdings for the last two months.