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I have to pay estimated taxes $2400 during this Year. What…

Hi. I have to...

Hi. I have to pay estimated taxes $2400 during this Year. What penalty will be If I will not pay it during 2018 but pay whole sum after filing 2018 taxes in the 2019?

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3/11/2018
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,594
Experience: IRS licensed Enrolled Agent and tax instructor
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Hi. My name is ***** ***** I will be happy to help you.

US tax system is pay as you go system. It means that you are required to pay your taxes as you earn income. To avoid underpayment penalty you need to have 90% of your current year tax liability (or 100% of your prior year tax liability, whichever is less) withheld or paid (through estimates) by December 31, or January 15 if you are required to make estimated payments. You can pay the remaining 10% in April.

Even if you do not owe any taxes or pay all your estimates in January, you can still be penalized if you are receiving period payments and do not have any withholdings or do not make any estimates for each quarter.

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Customer reply replied 1 month ago
Hi, Eva! This is not clear for me. Let try to explain again. I did my taxes for 2017 as self-employed. And I owe $2400 for that Year. But I also got this sum as estimated taxes for 2018 and should pay it every three month during 2018. I need to know the amount of underpayment penalty in case if I will not pay it during 2018 but will pay all may taxes for 2018 after filing it in 2019?

The underpayment penalty is .5% for every month you are late, in addition to 3% penalty for every quarter. The balance depends on actual income from that quarter. For instance, if you make 10K in the first quarter and your tax is $1500 (assuming 15% tax bracket), you will be penalized 1.5% for every month you do not pay. If you do not have any income in the first quarter, you will not be penalized for not making any estimated payments.

I generally advise my client to pay between 15 - 25% of their quarterly income (depending on their tax situation), as estimated payments to avoid underpayment penalty.

There are worksheets you can use to figure out your quarterly estimates.

emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,594
Experience: IRS licensed Enrolled Agent and tax instructor
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Customer reply replied 1 month ago
Thank you, Eva

You can find your estimates worksheet here on page 8: https://www.irs.gov/pub/irs-pdf/f1040es.pdf

If you have a good tax professional he or she will be able to give you quarterly estimates based on real income, not on annual projection.

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