The IRS charges if you don't pay estimated tax?
 

I've never sent in estimated tax payments through the year....I always wait until April and just cut the IRS a big check. But now they're telling me I owe penalties and interest because I did that? WTF? Does this happen to anyone else or are they picking on me this year?

And no my accountant didn't say shit about this happening. I need a new one.

yep, i just found that out last year too, IRS charges for everything they can

Yes of course, otherwise everyone would wait until April 15 to pay all their taxes.

But I've always waited....is this a new law?

sounds like your accountant sucks.

yup, they charge penalties for paying late.

I got audited by the irs too, its not fun. pay your taxes on time.

How did the audit go? Did you have all your shit together? Did you get fined for anything?

Yeah there's an underpayment penalty...but it's pretty low.

I usually just pay the penalty and wait until April 15 to pay....it's pretty cheap money. Cheaper than say paying what you owe every quarter and then getting a bank loan to finance new projects. :2 cents:

your accountant obviously is an idiot
that system is maintained by governments all over the world, not just the states

Your taxes aren't due until Apr 15th... I have never heard of an estimated tax penalty, as long as you pay your taxes on time they can?t penalize you. Ask them to show you where in the law it says that or go look yourself.

I pay before the 15th every year, and every year we don't make a payment until the taxes are due. We have never had an estimated tax penalty. The IRS is very well known for making up it's own rules, outside of the written law.

I pay quarterly, it sucks

Actually your taxes are due by the 15th day of the month after the end of the quarter. (I.E. April 15th for the 1st quarter)

Now I don't pay quarterly, and just pay the penalty at the end of the year, but that's just me.

No it's not new. it's been there for years. the policy is, if i remember it correctly, but look at irs.gov to make sure ....

if you suspect you're going to owe more than $1000 in taxes at the end of the year... that you send them some of that money through out the year as a good faith payment on your "debt". there is some sort of calculator you can use based on last years reported income. basically it's easier to send in regular withholding checks...than to figure out another one of their policies

yep taxes are due quarterly, apr 15th is just another due date in the year.

That is the first thing your accountant should mention to you. If your accountant didnt mention those penalties, then you definitely need a new one. Pay quarterly.

your accountant sounds like a moron if he didn't know that...

We always pay in one sum and thats after extending til oct . The penality is peanuts and that way I get to have my money work for me instead of them.

This is nothing new (although it sounds like your accountant is). The Q2 deadline for est. tax payments was June 15th.

Yes you do need a NEW accountant! You'd also be wise to consult with an attorney regarding a suit against your accountant (assuming what you've posted is accurate).

I had all my shit together, thanks to paypal receipts and bank records.
Although it was uncomfortable explaining to him what "content" purchases meant.
Cost me $1,500

Yes... I learned about this last year. I had been warned by my accountant, but I failed to listen. While the fine is minimal, it's worth it to have the IRS look the other direction in as many instances as possible. Pay the quarterlies and be done with it! :)

Surely you don't think they go by the law.. The courts don't even go by the law when it comes to taxes..

If you really want to see what the law says.. Download this expose' .. Not a conspiracy theory... The actual tax requirement law broken down so anyone can see what's goin on... Just sit & watch it..

Oh it gets even better..

Did you know that if your prior year's adjusted gross income exceeded $150,000, or $75,000 if you filed a separate return from your spouse, then you must pay 110% instead of 100% of last year's total tax as estimated tax or you could face penalties if you end up owing.

Also... you may not realize it but when you work for an employer (where you receive W-2s at year end) you are paying estimated tax everytime the employer deducts Federal Income Tax from your paycheck...rather than quarterly.

As a sole proprietor or business of any sort, if you don't count yourself as an employee of the business and pay yourself a regular salary in which you also deduct payroll taxes and pay them to the government, then you're expected to pay estimated taxes during the year. For my S-corp, I pay myself an annual salary (on paper) which helps to reduce the net income on my business. It also allows me to pay employment taxes into Social Security and Medicare so that when I'm old and grey I can receive benefits (if the SSA is still around then).

The standard rule for estimated taxes is that if you owed any tax at all in the previous year (not that you had to pay on Apr 15th cause you hadn't paid enough, but if you had enough income to require you to owe income tax), then you are expected to pay estimated taxes for the next tax year. Penalties are usually 1/2 of 1% per month of the net tax due and apply from April 15th even if you filed a 4-month extension unless you paid at least 90% of the of the total tax due by April 15th. There is also interest access at the rate of 3% over the Federal Short Term Rate which right now is 3% itself but was 1 and 2 percent during 2004. The dates would run from the end of the first quarter when the first payment was due, so essentially if you filed and paid your taxes on April 15th and were required to pay quarterly estimated taxes but didn't, you'd owe approximately interest and penalties per month for 12 months on the first quarterly amount, plus 9 months on the second quarterly amount, 6 months on the third and 3 months on the fourth.

I've heard of them come back and ding people for being a day or two late with the estimated payments in any given quarter. Funny how they don't give you interest on overpayments for their use of your money unless it's their fault you overpaid.

Okay.. I have a headache now.

LOL are you serious?

I think some people are missing the difference of paying personal taxes and paying self employed taxes. If you are a sole proprietor you must pay quarterly. If you never DBA'd then you do not need to. Some of those who never paid quarterly probably are not truely self employed by the gov't standards... and yes, they do come back to get you.. and also yes, it is good to give them ZERO reasons to magnify your books.

I beg to differ V_Rocks... individuals are required to make estimated tax payments whenever they expect to owe tax for the year and Federal Income Tax deposits made on their behalf by an employer (if employed) are not equal to 90% of what they owed in total for the prior year. If no one makes Income tax deposits on your behalf then you must pay quarterly to cover the tax owed on income in that quarter.

Read more here.. http://www.irs.gov/taxtopics/tc355.html

I don't see how people making decent money in this biz still claim to be self employed and pay all that extra tax. Just incorporate, pay yourself a salary from the comany each month, and pay taxes every 3 months.

They charge for paying late.

Depends on how much you make, if your making a shitload then yes there is penalties if you do not pay quarterly.... Your accountant should have given you estimated payment vouchers

It's not that simple though.
If you pay yourself a "salary" then you are required to pay withholding tax on that salary by the 15th of the following month.
Social Security and Medicare are "payroll" taxes so if you're collecting a salary then you have to pay those taxes every month. I pay mine at the bank on or before the 15th of every month.

Then the quarterly tax payments are for the estimated profit of my business (the money I made that wasn't "salary") That's a whole other ball of wax.

By incorporating or forming some other business entity, you can ease the pain of the "self employment tax" (paying both the employee and employer share of social security and medicare taxes) but you can't get out of paying those taxes altogether.

From what I understand, it's only mandatory to pay quarterly taxes if youre on an installment agreement.

Ummm...is this a fucking joke?

I've been paying taxes since i was like 12 and knew about this? I thought it was common knowledge? :(


Just right them an appology note and i'm sure they'll let it slide this time :winkwink:

I pay quarterly payments to revenue canada... im sure the IRC probably works the same way. They're calculated off your previous years income, it's pretty lame.