Quarterly tax payment - oops...forgot!
Since there seem to be some pretty knowledgable people on here I thought I'd post this and see if anyone has any comforting words to make me feel better. I totally didn't realize my next "quarterly" tax payment was due June 15. I thought it was July 15. I was supposed to pay $1800 by 4 days ago and I don't even have it due to my dog having some serious medical issues recently. I'm going to call my CPA but since it's the weekend and I can't call her now I'm freaking out wondering if I'm in serious shit. I've been told that you can just catch up next quarter if you are short but the person who told me this was a lawyer, not a CPA or accountant so he may not know what he's talking about. My quarter payments are based on what I payed last year. I've been trying to research online and all I'm getting is confused...and I even took tax accounting in college! I just hate this stuff.
:-\
Re: Quarterly tax payment - oops...forgot!
I made the same mistake the first year I paid estimated taxes. I just ended up paying it late and having a small penalty later on when I filed my return.
Re: Quarterly tax payment - oops...forgot!
Yup, sending in a late payment is better than skipping one altogether.
Re: Quarterly tax payment - oops...forgot!
Well I just talked to my CPA and she said if I send them something it will be good even if it's not the total payment and I might end up with a $200 penalty at the end of the year or something so that's not as bad as I thought. I had spent about $1500 in unexpected veterinarian bills this past month ($750+ this weekend!!!) so I pretty much don't have jack shit to send them right now.
Re: Quarterly tax payment - oops...forgot!
I don't mean to offend anybody, but the bottom line on estimated taxes is that estimated tax money becomes the property of the US gov't on the dates the payments are due - whether it has been paid or not. Anybody who does not make the estimated tax payment on time and in full, in a very real sense, is 'borrowing' that unpaid estimated tax money from the gov't at a very high effective interest rate (due to high interest plus the penalties). You're actually far ahead money wise to make the estimated tax payment in full and on time, and to charge other necessary expenses to a credit card if you don't have the cash to cover those expenses.
Re: Quarterly tax payment - oops...forgot!
Yep. that is true, Melonie. Unfortunately I had an emergency come up and that was the only place to get the money. I already charged the last vet bill on a credit card. But yeah, I'm going to be saving even more and make a big payment next quarter and be sure also I know exaclty when it was due. I guess I was thinking that because the last one was due April 15, 3 months (a quarter) would be July 15 so I screwed that up.
Re: Quarterly tax payment - oops...forgot!
I would echo what melonie is saying, pay as much as you possibly can as soon as you can, don't just say "well I will pay double next quarter, and pay the penalty, it may very well be more than the $200 you CPA says. The IRS does not veiw estimated payments as a "well as long as it's the correct amount at the end of the year it's Ok" sort of deal. get the money, if that means working some extra shifts you had not planned on do that, I don't know what you make but if you worked 5 extra shifts in the next two weeks would you end up with an extra $1000-1500? Maybe some of the girls at your club do private parties, batchelor parties, that sort of thing that you can get in on and make some extra cash, I'm not saying start being an extra's girl or anything but if you can expand you customer base this way if only for a short time it would be worth while to do rather than decided to just take that very high interest loan from the IRs
Re: Quarterly tax payment - oops...forgot!
actually to clarify something here I'm not a dancer (well I've danced once but that hardly counts) but I am a contractor paid on a 1099. I get paid 8 weeks from the time I bill my work. So I know what I'm making in the next 8 weeks. I am actually pretty busy now again (finally) but won't see that for 8 weeks. So I was going to send them what I can friday which is only about $350 or so but at least it's something and then save for the next quarter. If I can find the time I'll go dance again for some extra $ but at the current time I'm about as busy as I can stand with my regular job...just don't see the $$$ right away.
Re: Quarterly tax payment - oops...forgot!
My fiancee was an IC last year, and didn't bother to pay any of his quarterly payments. When tax time rolled around this year the penalties were about 20%. Since he wasn't smart enough to set aside money for taxes, his payments this year are collected with interest, but it's only at prime. He thought the interest rate was 20% and was about to transfer it to a credit card, but then realized it was the penalties he'd already calculated.
Your CPA's probably right about a $200 penalty, and sending them something is much better than nothing (it lowers the penalty). I wouldn't spazz over it, but just remember next time it would have saved you a couple hundred bucks.
Re: Quarterly tax payment - oops...forgot!
yes, on an annualized basis the 'effective' annual interest rate on money 'borrowed' from the IRS by not making estimated tax payments on time is in the 20% penalty + 5% prime = 25% ballpark. This is why it usually makes sense to make the estimated tax payment on time, even if it means putting other bills on a credit card at 15% interest ... because by next April 15th the 'hole' you are in will be 10% less deep !
Re: Quarterly tax payment - oops...forgot!
yeah, I'm a tard. I'm tightening up my finances.... It could be worse. One of my friends last year didn't pay in enough and ended up owing $10,000 at the end of the year and didn't have it.
Re: Quarterly tax payment - oops...forgot!
I am very confused on this issue. Doesn't the irs charge like 1/2 percent interest on late taxes? I am on a payment plan because I didn't do estimated taxes last year ( was not aware of all the details until recently). They charged me a $62 penalty and I am paying 1/2 percent interest on the money owed , and the total tax is like 8,000.
How is it better to pay the estimated taxes, and put other expenses on a credit card(my rates are like 18% so maybe this is where we differ in opinion?) rather than pay the tax in full by the April deadline? (for next year)
I am in the process of buying a new home right now and am saving for the down payment, i will be able to save a large chunk for next years taxes, after that, and planned to pay in full when due, I epect a penalty. Is this wrong? and will it effect my payment plan for last years tax?
I think I am really confused, but can you help clarify? Thanks
Re: Quarterly tax payment - oops...forgot!
I wanted the above post to go to melonie- sorry
Re: Quarterly tax payment - oops...forgot!
Buffie, I have to assume that the reason was the 'first year' loophole, which prevents the IRS from penalizing someone for underpaying estimated taxes this year if the amount of tax they owed in the previous year (i.e. the income they earned in the previous year) was very low or zero. Without this 'first year' loophole, the penalty due on total non-payment of $8,000 worth of estimated taxes would have been well over $1,000. As to 'official' IRS interest rates, they're now up to 6% for the current and last quarter ...
In regard to IRS penalties ...
"If you have a balance due on a late tax return, the IRS will calculate additional penalties and interest. There are three separate penalties:
* Failure to File Penalty
* Failure to Pay Penalty
* Interest
Each is calculated differently. Let's take a look at each one.
Failure to File Penalty. This is calculated based on the time from the deadline of your tax return (including extensions) to the date you actually filed your tax return. The penalty is 5% for each month the tax return is late, up to a total maximum penalty of 25%. The percentage is of the tax due as shown on the tax return. (insert : this applies to failure to make the April 15th annual tax return filing plus payment in full)
Failure to Pay Penalty. This is calculated based on the amount of tax you owe. The penalty is 0.5% for each month the tax is not paid in full. (insert : this applies to failure to make payment by quarterly estimated tax dates, and it is cumulative on quarterly amounts due - for non-payment of first quarter estimated taxes this comes out to be 6%)
Interest. This is calculated based on how much tax you owe. Interest rates change every three months. Currently, the IRS interest rate for underpayments of tax is 6%* per year. "
Interest Rate on Noncorporate Overpayments and Underpayments
Dates Overpayments Underpayments
Jul. 1, 2005 -- Sep. 30, 2005 6% 6%* Apr. 1, 2005 -- Jun. 30, 2005 6% 6% Jan. 1, 2005 -- Mar. 31, 2005 5% 5% Oct. 1, 2004 -- Dec. 31, 2004 5% 5% Jul. 1, 2004 -- Sep. 30, 2004 4% 4% Apr. 1, 2004 -- Jun. 30, 2004 5% 5% Jan. 1, 2004 -- Mar. 31, 2004 4% 4% Oct. 1, 2003 -- Dec. 31, 2003 4% 4% Jul. 1, 2003 -- Sep. 30, 2003 5% 5% Apr. 1, 2003 -"- Jun. 30, 2003 5% 5% Jan. 1, 2003 -- Mar. 31, 2003 5% 5%"
Thus somebody caught not paying estimated taxes and not filing a tax return is potentially subject to a 25% non-filing penalty plus a 6% failure to pay on time penalty plus 6% interest, totalling 37% .
Re: Quarterly tax payment - oops...forgot!
I have a friend whose husband is a CPA and she told me today she hasn't sent a dime in and won't until the end of the year. I also watched her give him her year end figures last year and for her gross income she added what she made on 1099's to a number she pulled out of the air as a guess for everything else! It's funny that someone who is so dingy about money is married to a CPA! Of course her husband doesn't know that she made up her income figure....at least there are people out there worse than me. I've always been anal about my money so I hate to do anything "wrong" but I have to take care of my puppy dog first and I have to do what I have to do.
Re: Quarterly tax payment - oops...forgot!
Thanks that clears things up!
Re: Quarterly tax payment - oops...forgot!
here's my issue: we get a form at the end of the year to pay taxes in my state. do i see my accountant to pay quarterly or just pay once a year like most. should i just make an estimate and send that in and get money back if i paid too much per quarter?
Re: Quarterly tax payment - oops...forgot!
Quote:
should i just make an estimate and send that in and get money back if i paid too much per quarter?
Making a quarterly guess, sending in a quarterly check, and 'trueing up' the actual tax due after the 1099 forms are issued in February by filing an April tax return is exactly what the IRS expects you to do.