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Old 11-18-2016, 08:17 AM   #21
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Originally Posted by audreyh1 View Post
Are you self employed and this is how you handle withholding? Otherwise IRS expects quarterly payments - -and on their odd quarterly schedule of Jan 15, April 15, June 15 and Sept 15.
Not self employed, pension, SS, dividends and interest. I have been doing it this way for 2 years.

I make my last payment in December and first payment in January of new year.
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Old 11-19-2016, 09:45 AM   #22
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You might be ok. You can use the annualized installment method to calculate your tax liability as of 3/31/16, 5/31/16 and 8/31/16 based on your year-to-date income and if your YTD withholdings exceed the tax then you are all set. See Form 2210, Schedule AI.

Essentially, you calculate your tax as of each date and if you are overpaid then you are all set.

I do one each year because my tax liability arises in the last quarter when year end dividends are paid, I do my Roth conversion and raise cash for the coming year so I just do an estimated payment at the end of the year.
Great answer.

As to the other post with a comment about making up quarterly income values that tie-out to the annual value, I'd certainly not do that, as it would constitute fraud (vs a mistake). Maybe if you had one check dated the end of the month and it somehow was incorrectly recorded the following month, I don't think they'd throw you in the clink for that, but the reward wouldn't be worth the risk for anything blatant.
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Old 11-19-2016, 11:20 AM   #23
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I use EFTPS- Electronic Federal Tax Payment System https://www.eftps.gov/eftps/direct/EftpsHome.page and the CA equivalent for my quarterly estimated tax payments. The payments are taken out of my checking account, and I have them scheduled a few days before the 15th of each quarter.
I use https://www.pay1040.com/ I charge it on my Fidelity Visa credit card. There is a 1.87% charge, and I get 2% back.

I paid $3,000 on 9/15, and actually was charged an additional $56.10 as a service fee. I get $61.22 back from Fidelity. I do not make much, but it's another $5 in my pocket.

I just wish I could dispute the charge as I did not get my money's worth on the product.
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Old 11-19-2016, 03:52 PM   #24
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I use https://www.pay1040.com/ I charge it on my Fidelity Visa credit card. There is a 1.87% charge, and I get 2% back.

I paid $3,000 on 9/15, and actually was charged an additional $56.10 as a service fee. I get $61.22 back from Fidelity. I do not make much, but it's another $5 in my pocket.

I just wish I could dispute the charge as I did not get my money's worth on the product.
Would you consider the fee you pay, an expense like paying an accountant to do your return, or investment newsletters, and therefore deduct it from your income ?
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Old 11-19-2016, 06:43 PM   #25
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Would you consider the fee you pay, an expense like paying an accountant to do your return, or investment newsletters, and therefore deduct it from your income ?
I view it as a necessary evil to pay the tax. I would say it is deductible.
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Old 11-19-2016, 09:21 PM   #26
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Most people get money throughout the year, so if you use the "quarterly estimated" approach you wind up doing an annoying section of your taxes four times. At least for me, the dividends and interest and such are the most detailed part, and doing that 4x is definitely "a pain" as an earlier poster said.

I'd suggest the prior year safe harbor - add up what you withhold for this year and make estimated payments to bridge the gap. Note the timing of your estimated payments matters - if you're asking what to do now, with so little time left, you might already be looking at a penalty. You could open up last year's tax software, plug in basic numbers, and see what it estimates for the penalty (underpayment x 0.5%/mo or 6%/year).
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Old 11-19-2016, 09:49 PM   #27
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Most people get money throughout the year, so if you use the "quarterly estimated" approach you wind up doing an annoying section of your taxes four times. At least for me, the dividends and interest and such are the most detailed part, and doing that 4x is definitely "a pain" as an earlier poster said.

I'd suggest the prior year safe harbor - add up what you withhold for this year and make estimated payments to bridge the gap. Note the timing of your estimated payments matters - if you're asking what to do now, with so little time left, you might already be looking at a penalty. You could open up last year's tax software, plug in basic numbers, and see what it estimates for the penalty (underpayment x 0.5%/mo or 6%/year).
I agree. Send in what you think will be needed, by 12/15. I doubt there would be any audit if the amount is within the safe harbor limits. The IRS has better things to investigate than when someone actually earned the money. As long as the total tax is paid by the final due date of 12/15.
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Old 11-20-2016, 07:42 AM   #28
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I don't think this will work but at this point it is the best that you can do.

The IRS will expect that your total tax be received evenly over the year... if not, then their computers will send you a bill.

Let's say that you owe $10,000 in tax and try to get cute an pay it all in December. It is very easy for them to see that your cumulative taxes paid were $0, $0, $0 and $10,000... and they'll send you a bill for penalties and interest.

Then the burden of proof is on you to prove that you had not tax liability based on your your income as of the end of each estimated payment period, which is essentially what the Form 2210, Section AI does.
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Old 11-20-2016, 09:45 AM   #29
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Right, I always file Form 2210 section AI when I pay uneven quarterly estimated taxes during the year (not counting withholding which is not an option for me).

I have the data required by the form, because that's how I figure the estimated taxes to begin with. I do receive the bulk of my income in Q4.

I only do the annualized income method in years following a large jump in income - for example if a large capital gain was realized the year before, resulting in a much higher tax, and not to be repeated the next year.

Otherwise it's just far easier to pay equal quarterly installments based on the prior year's taxes.
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Old 11-20-2016, 09:57 AM   #30
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I prepared taxes for 35 years, and have seen the IRS penalize clients all the time for underpayment of taxes when they paid in uneven amounts. The penalty is calculated like interest. In those 35 years, the clients always got out of the penalty if they gave us good information and paid the amounts we computed (even $0, $0, $0, $$$$). The trouble arose when they forgot to tell us about something (I sold the rental house in January, does that affect the calculations?). Completing the Form 2210 will stop any notices and prevent, or at least lessen any penalties. I have never seen, nor heard about, the IRS trying to assess any fraud penalties, even if the client just refuses to pay any estimates.
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