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late estimated tax payments

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gamma234
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late estimated tax payments  Reply with quote  

Problem: we just determined that one of our entities should have been making estimated tax payments in 2012, but so far has not. So, we've missed the April and June 2012 payment deadlines. What is the best way to make this up to avoid (or reduce) penalties?

Some options:

(1) send 3 checks (3 payment vouchers) to the IRS in September, two of which will represent the late April and June payments

(2) send 1 large check (1 payment voucher) in September to cover April, June, and September, and then make a final estimated tax payment in January.

(3) send 1 super-large check (1 payment voucher) to cover the entire 2012 estimated tax liability.

Thanks! Very Happy
Post Tue Sep 11, 2012 3:17 pm
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oldguy
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The IRS calculates your short-fall by the month. Ie, your submitted tax payments is checked against your tax liability as the year progresses. Your penalty is calculated based on the monthly short-fall. So if your were short from Jan to Sept, that is already fixed. Your next payments will affect only your Sept to Dec penalty.

So options 1 & 2 are the same to te IRS. And option 3 doesn't get you 'extra credit for good behavior'. I would probably use option 2.
Post Tue Sep 11, 2012 3:41 pm
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clydewolf
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Re: late estimated tax payments  Reply with quote  

quote:
Originally posted by gamma234
Problem: we just determined that one of our entities should have been making estimated tax payments in 2012, but so far has not. So, we've missed the April and June 2012 payment deadlines. What is the best way to make this up to avoid (or reduce) penalties?

Some options:

(1) send 3 checks (3 payment vouchers) to the IRS in September, two of which will represent the late April and June payments

(2) send 1 large check (1 payment voucher) in September to cover April, June, and September, and then make a final estimated tax payment in January.

(3) send 1 super-large check (1 payment voucher) to cover the entire 2012 estimated tax liability.

Thanks! Very Happy

Gamma234,

Not paying the tax on time can cost you about 4 to 5 % of the amount you are late on paying.

It sounds like you have several businesses.
Is this a personal or business tax question?

If it is a personal tax question;
1) Are you an employed by someone else? Increase your withholding.

2) Do you have an IRA and are you over age 59 1/2? Take a distribution and have an amount withheld that will cover the distribution plus the amount of withholding you are behind.

Taxes collected from withholding are assumed to be received throughout the year.
You could provide sufficient withholding on December 31, and the IRS would view that as being received evenly throughout the tax year.
Post Tue Sep 11, 2012 5:51 pm
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gamma234
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The entity involved is an irrevocable trust of which I am a trustee. I'm also responsible for managing the trust's finances.

I think that oldguy has the best approach. I checked the IRS website, but didn't see a simple explanation of how late penalties are calculated. Now I've got an idea.

Thanks for the help! Very Happy
Post Tue Sep 11, 2012 9:20 pm
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coaster
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I agree with option #2. If you use tax software, it should automatically calculate the penalties for you. Other than that, you can do it long-hand by using the proper form -- it's form 2210 for individuals, don't know if that applies in your case or not, but it's worth starting there.

~Tim~
Post Wed Sep 12, 2012 6:43 am
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