Oops. IRS quarterly payments were due 9/15

[Animorph]

I used eftps.com to automatically make payments for me for the year. I scheduled each one to be made a couple of days early. That has worked nicely.

[audreyh1]

I schedule it for the actual day it's due. I usually go to the website about 5 days ahead to schedule the payment (although I could do it the day before), but it doesn't get pulled out of my account until the day it's due. I like that - why pay early?

Audrey

[Gotadimple]

Quote:

Originally Posted by audreyh1 I like that - why pay early? Audrey

The only advantage to paying early is if you know there will be a penalty. It does give a small credit in the penalty calculation. But! If you go to the work of setting up the payment calendar and determine the approximate payment amount, there shouldn't be a penalty to worry about.

-- Rita

[beowulf]

Thanks for the link Audrey. It seems that those of us with pensions that allow withholding can finesse this by simply having enough withheld from the pension to ver any taxes on it plus any other withdrawals we make from 401Ks, etc., that would be subject to tax. It would reduce the amount of the pension each month, but no worse than having to come up with the money every quarter. I've never been self employed or in a job where taxes were not withheld, so the idea of doing a quarterly return seems less attractive than just having enough withheld monthly to cover any extra withdrawals from other sources. Plus, I can always up the amount later in the year to make sure I don't owe.

I don't know for sure, but it looks like the main thing is not to owe more than $1K at tax time, no matter what the cash flow was during the year. Are there any programs that will figure your taxes on a running basis and all you have to do is update income and deductions each month?? That would be very handy for retirees.

[audreyh1]

If most of your money is coming from things that can withhold taxes for you, then that does simplify things tremendously.

I haven't found any such program. Annoying - as I would use it! I've had to do my own spreadsheets based on the tax forms.

For estimating taxes lot of people just take the previous year's tax and divide by four to estimate the current year's estimated tax payments. This works well if you have about the same income each year and if your income is fairly evenly spaced out during the year.

My income each year varies widely and most of it tends to be lumped in the 4th quarter, so I use the annualized income method and calculate the actual taxes due each quarter.

Audrey

[happy2bretired]

Quote:

Originally Posted by restonham Thanks for the link Audrey. It seems that those of us with pensions that allow withholding can finesse this by simply having enough withheld from the pension to ver any taxes on it plus any other withdrawals we make from 401Ks, etc., that would be subject to tax. It would reduce the amount of the pension each month, but no worse than having to come up with the money every quarter.

That's what I do. I know most people on this board probably think I'm letting Uncle Sam use my money too long, but it works for me.

[audreyh1]

Nothing wrong with simple especially when income is evenly distributed over the year, and who cares about a small amount. The only reason I go to all the trouble is that otherwise I would WAY overpay as I have no pension, my income is completely unpredictable, and is not evenly distributed over the year but rather bunched at the end.

Audrey

[audreyh1]

BTW - since this thread has turned into a discussion of strategies for paying estimated taxes, folks might find the thread from April of this year useful:

http://www.early-retirement.org/foru...9-a-43407.html

Audrey

[Stevewc]

If you earn money randomly throughout different quarters, don't forget to file the form 2210 (i think it is). This basically show the IRS when (date)you earned the money. One year that form was not sent in (online file no less). The form was sent behind the original tax filing, I think one day later. The IRS didn't get the 2210 form attached to my 1040 for some reason. I think it took me a year to get it straight and get my money (10K) back, that I was penalized. That was after moocho letters back and forth. It is so much fun to get letters in your mail all year from the IRS. I'm kind of getting use to it now. Seems every year I manage to need to do an amendment or something.
Before long we will be on first name basis
Steve.
PS. One good thing, it doesn't freak me out like it did the first time !!!

[audreyh1]

Fortunately, Turbo-tax remembers to do that form 2210 for we when we do our 1040.

Audrey

[Stevewc]

Quote:

Originally Posted by audreyh1 Fortunately, Turbo-tax remembers to do that form 2210 for we when we do our 1040. Audrey

That's interesting, since I was paying someone to do my taxes and helped me goof mine up.
Steve
PS. We always did our own taxes. We made a small mistake one year and decided to pay someone to do them. Worked out just great, they made a much bigger, more costly mistake for us.

[bizlady]

To avoid penalty with the IRS, you need to have paid or had with held either 90% of what your tax liablity is for the tax year (2009 currently), or 100% of what your tax liabiltiy for the previous year was (2008). This assumes your taxable income is under $150k and that you make payments on time.

Rules are different if your taxable income is greater than $150,000

[audreyh1]

Quote:

Originally Posted by Stevewc That's interesting, since I was paying someone to do my taxes and helped me goof mine up. Steve PS. We always did our own taxes. We made a small mistake one year and decided to pay someone to do them. Worked out just great, they made a much bigger, more costly mistake for us.

It's really incredible that a tax professional would miss the need to file the 2210.

If I remember correctly, in Turbo-tax we put in what taxes we paid and when during the year, and the Turbo-tax does the 90% check, check against previous years taxes, and notices whether the amounts are evenly distributed through the quarters and then flags if the 2210 is necessary to avoid penalty.

Something like that. If you just put in the total taxes paid it might not catch it.

Audrey

[walkinwood]

This forum is great on so many levels!

I believe we all need to do our own homework, but there is so much knowledge here to point people in the right direction. Having always had a steady job, this is the first time I'm hearing about the 2210.

Thank you all.

[MJ]

I have been using eftps for several years. Since I live overseas, it's a great way to schedule and pay not only my estimated tax but any tax I owe on my 1040 return. You can schedule all your payments way in advance for the date that they are due.
Since I keep track of all my income on a spreadsheet, I know how much quarterly income I earned 2 weeks before the estimate is due. Using my free Taxact software form 2210, I determine the minimum tax I need to send without incurring a late penalty. I would rather owe the IRS money on April 15th than overpay during the year.

[BOBOT]

We installed a new heat pump system this year which qualifies for the gummint subsidy, so not only do we not need to to file estimated qrtly pmts, we'll actally get a substantial refund from the feds for the first time in ~35 years. Wish the same were true of our state taxes .