Individual estimated tax question

[Dan]

Hi, I have some hopefully easy questions.

I made four equal estimated 1040-ES tax payments for 2009. 2nd & 3rd
payments were both late by one day.

I think I am going to get back 3/4 (meaning 3 out 4 of the payments)
because my income was so low for the year. My total liability will
probably be less than $1000. Will I have to pay penalties?

Also, if towards the end of the year, I realize that I'm not going to
make enough income, can I reduce or eliminate my last estimated tax
payment(s), or does the IRS demand four equal installments throughout
the year?

Thanks very much!
Dan

 

[paulthomascpa]

Hi, I have some hopefully easy questions.

I made four equal estimated 1040-ES tax payments for 2009. 2nd & 3rd
payments were both late by one day.

I think I am going to get back 3/4 (meaning 3 out 4 of the payments)
because my income was so low for the year. My total liability will
probably be less than $1000. Will I have to pay penalties?

It doesn't sound like it. From what you say, the first payment basically
covered your liability, and it was not only timely, but covered the tax
liability amount for the rest of the year.

Also, if towards the end of the year, I realize that I'm not going to
make enough income, can I reduce or eliminate my last estimated tax
payment(s), or does the IRS demand four equal installments throughout
the year?

I trust you are referring to 2010, because 2009 is closed now. But yes, you
can adjust the tax payment amount, up or down, to more closely match your
revenue stream and the resulting tax liability.

 

[removeps-groups]

I made four equal estimated 1040-ES tax payments for 2009. 2nd & 3rd
payments were both late by one day.

I think I am going to get back 3/4 (meaning 3 out 4 of the payments)
because my income was so low for the year. My total liability will
probably be less than $1000. Will I have to pay penalties?

Also, if towards the end of the year, I realize that I'm not going to
make enough income, can I reduce or eliminate my last estimated tax
payment(s), or does the IRS demand four equal installments throughout
the year?

Having equal estimated payments throughout the year helps to simplify
the tax return. If for example you pay $5000 each quarter, then you
can just use the short part of form 2210 to calculate your estimated
tax penalty. If you owed $50000, then you were short $30000, and so
you calculate interest by multiplying $30000 by a factor (which is on
form 2210 itself, and is 2.66% for 2009).

On the other hand, if your income varied during the year, each
quarter's estimated payment is different. It's possible you earned
70% of your income in Q4. In this case, only Q4's payment should be
higher. You use the long part of form 2210. And you have to track
your income and expenses for each quarter, and essentially do 4 tax
returns, with the result tax for each quarter summarized on form
2210. It's very tedious, especially if you have dividends and stocks,
etc.

 

[hr(bob) hofmann]

It doesn't sound like it.  From what you say, the first payment basically
covered your liability, and it was not only timely, but covered the tax
liability amount for the rest of the year.


I trust you are referring to 2010, because 2009 is closed now.  But yes, you
can adjust the tax payment amount, up or down, to more closely match your
revenue stream and the resulting tax liability.

I think the OP is referring to the last payment of the 2009 estimated
taxes which is due on Jan 15 of 2010.

 

[Jack]

Hi,  I have some hopefully easy questions.

I made four equal estimated 1040-ES tax payments for 2009.  2nd & 3rd
payments were both late by one day.

I think I am going to get back 3/4 (meaning 3 out 4 of the payments)
because my income was so low for the year.  My total liability will
probably be less than $1000.  Will I have to pay penalties?

Also, if towards the end of the year, I realize that I'm not going to
make enough income, can I reduce or eliminate my last estimated tax
payment(s), or does the IRS demand  four equal installments throughout
the year?

Thanks very much!
Dan

One other thing is that there really isn't a penalty. They charge you
interest, but it isn't a big deal; not have having a past due credit
card bill.