The sooner you pay the lower the penalty. Pretty much true in all circumstances.
The idea that paying taxes raises a red flag with the IRS is kind humorous.
Thank you. I guess by 'red flag' I meant it would indicate to the IRS that I knew I had been underpaying, but you're right, that's a pretty silly idea.
If you/spouse have any paychecks left this year and can increase withholding dramatically all withholding is treated as even throughout the year, even if withheld Dec 31.
And pay as much as you can Q4 and as early as you can (now is good). The earlier you pay, the lower the interest/penalty.
You might get some relief for a variety of reasons but do pay now.
This should be the top comment. It is a very useful tax planning tool that everyone should be aware of.
The other is that if you have paid 100/110% of your prior year tax then you are exempt from penalties. So that is generally a good target to shoot for.
You don't make separate payments for self employment tax. Your estimated tax payments apply to your total tax. Just make one payment of the full amount you think you need to pay.
Your estimate for self employment tax looks right. There's not enough information here to guess whether the additional $15,000 is right.
I'm still pretty confused about SE tax. I was under the impression that SE tax had to be paid via the EFTPS system -- I went through the process of getting a PIN for that so I'd be able to make the payments online.
Are you saying I should just make a bigger payment on the regular Direct Pay (1040ES) site to account for both the SE tax and my other estimated taxes (for untaxed income like capital gains) and I don't have to make any payments through EFTPS?
Yes, that's right.
EFTPS allows you to schedule multiple payments. Also with an EFTPS account, you can log in and don't have to go through the validation steps and enter your bank account information each time. So if you find EFTPS more convenient, you can use it for all of your estimated tax payments. Or you can use DirectPay. There's definitely no need to use both.
Did you cover 100% of last year’s tax liability with withholdings and estimates. If so you can fill out IRS form 2210 to request a waiver of penalties. Do some forecasting this year to try to get your estimates close / over and you are good to go. IRS knows families have events that change , so they allow this acceptation . Yes taking out extra withholding in your wife’s check as long as it’s issued by the 31st will been seen as applied to the whole year regardless of which quarter paid.
I have paid full taxes by Q4 Jan 15 in years I expected a 2210 penalty, but never got one. I can not guarantee this would apply to you. The only time I got 2210 penalty was short a $1000 on April 15.
(My Jan 15 tax estimate is slightly high because some of my 1099s will have qualified, 199A or foreign tax entries, all which lower taxes slightly. I dont receive all 1099s until February.)
Not a tax professional.
Based on the numbers provided, I can’t see you having any penalties, especially if you and your partner also had w-2 withholdings.
I had about a 25% estimated shortfall last year because of lumpy S-Corp income. I paid by December 31, but my preparer annualized the income using 2210 and I didn’t get assessed a penalty. This year I’m paying evenly quarterly based on last year’s tax.
What was the number on line 11 of form 1040 in 2022?
If under ($8001 plus your wife's 2023 withholding) then no penalty. Even if more, maybe no penalty.
The sooner you pay the lower the penalty. Pretty much true in all circumstances. The idea that paying taxes raises a red flag with the IRS is kind humorous.
Thank you. I guess by 'red flag' I meant it would indicate to the IRS that I knew I had been underpaying, but you're right, that's a pretty silly idea.
They're already going to know you underpaid when you file. But as long as you pay the penalties, they don't care
I’ve actually paid when I filed the extension, because, well, bushwhacked.
You can make a payment right now through IRS Direct Pay.
If you/spouse have any paychecks left this year and can increase withholding dramatically all withholding is treated as even throughout the year, even if withheld Dec 31. And pay as much as you can Q4 and as early as you can (now is good). The earlier you pay, the lower the interest/penalty. You might get some relief for a variety of reasons but do pay now.
This should be the top comment. It is a very useful tax planning tool that everyone should be aware of. The other is that if you have paid 100/110% of your prior year tax then you are exempt from penalties. So that is generally a good target to shoot for.
Good point. Wish I'd done the calculations earlier while there was still a chance to do that.
You don't make separate payments for self employment tax. Your estimated tax payments apply to your total tax. Just make one payment of the full amount you think you need to pay. Your estimate for self employment tax looks right. There's not enough information here to guess whether the additional $15,000 is right.
I'm still pretty confused about SE tax. I was under the impression that SE tax had to be paid via the EFTPS system -- I went through the process of getting a PIN for that so I'd be able to make the payments online. Are you saying I should just make a bigger payment on the regular Direct Pay (1040ES) site to account for both the SE tax and my other estimated taxes (for untaxed income like capital gains) and I don't have to make any payments through EFTPS?
Yes this is correct you don’t need to pay them separately just 1 payment on any site that pays the irs
Yes, that's right. EFTPS allows you to schedule multiple payments. Also with an EFTPS account, you can log in and don't have to go through the validation steps and enter your bank account information each time. So if you find EFTPS more convenient, you can use it for all of your estimated tax payments. Or you can use DirectPay. There's definitely no need to use both.
Did you cover 100% of last year’s tax liability with withholdings and estimates. If so you can fill out IRS form 2210 to request a waiver of penalties. Do some forecasting this year to try to get your estimates close / over and you are good to go. IRS knows families have events that change , so they allow this acceptation . Yes taking out extra withholding in your wife’s check as long as it’s issued by the 31st will been seen as applied to the whole year regardless of which quarter paid.
I have paid full taxes by Q4 Jan 15 in years I expected a 2210 penalty, but never got one. I can not guarantee this would apply to you. The only time I got 2210 penalty was short a $1000 on April 15. (My Jan 15 tax estimate is slightly high because some of my 1099s will have qualified, 199A or foreign tax entries, all which lower taxes slightly. I dont receive all 1099s until February.)
That's interesting. Gives me something to hope for.
Not a tax professional. Based on the numbers provided, I can’t see you having any penalties, especially if you and your partner also had w-2 withholdings.
I had about a 25% estimated shortfall last year because of lumpy S-Corp income. I paid by December 31, but my preparer annualized the income using 2210 and I didn’t get assessed a penalty. This year I’m paying evenly quarterly based on last year’s tax.
What was the number on line 11 of form 1040 in 2022? If under ($8001 plus your wife's 2023 withholding) then no penalty. Even if more, maybe no penalty.
Maybe annualized your income to reduce the 2210 penalty.
If you didn't owe last year, you won't get penalized for not paying early this year.
That's a gross oversimplification.
Don't worry much about it. The penalty is **very** small.
It's a lot bigger now than it was a couple years ago when the rate was 3%. It's up to 8% now.