Form 2210 & Est Tax Payments

snipped-for-privacy@yahoo.com posted:

The rules exemplified by Form 2210 are one thing; realistic practices may be something else.

The following is not tax law, but practical experience:

I filed exclusively by making Estimated Tax payments for 15 years -- until I got smart a few years ago, and started arranging for withholding from my RMD's. However, over that 15-year period, I "forgot" at least 4 or 5 quarterly payments. Suddenly, in late August, I would realize there wasn't a payment made in June -- or in mid November, I would wake up to the fact that I missed a September 15 payment.

In every case, I immediately wrote a payment and sent it in with the "coupon" for the date which I had missed. I was also careful to make sure my total estimated payments came _very_ close to the amount due. Sometimes, I owed $40 or $50 ... sometimes I got a minor refund.

(My most triumphant year, was the time I got a $1 refund ... which was the first time I "tried out" direct deposit -- figuring I could live without the $1 -- which turned out to be no problem. I was then able to promise taxpayers that direct deposit worked, and fast.)

Never did I receive a notice of delinquency or a bill for "under-" or "late-payment" of my Estimated Tax.

So pay attention to the rules, but don't sweat the little things. If you make the rest of your payments timely, and your calculations are correct that you will wind up overpaying, I think it's safe to say you won't get penalized.

Bill

Form 2210 is for delayed payments. See the long method of form 2210 (part 4), lines 27 to 30, which ask for the number of days the payment was late. So if you owe $1000 for April 15, but paid $1200 on May 15, then the extra $200 is a free loan for the government on which you don't receive interest, and you have penalty/interest on $1000 from April 15 to May 15 which is 30 days, and at 6% a year we're looking at

0.06/12*1000=$5. If you leave the penalty field blank, the IRS will calculate the penalty for you. I don't know how sophisticated their computer program is and whether they will assess the $5, or more or less.

What you could do is leave the field blank, and if their penalty is $5 or less then go with it, otherwise file an amended return with your version of form 2210.

Thanks Bill. That may be what I do. I think I have a handle on my payments now so I should be pretty close to the required amount by the end of the year. If by some chance they do come after me, I'll show them the filled-out 2210 form that shows the estimated annualized payments each quarter vs the amount due. When they see my first quarter was an overpayment (just a little bit late) and all other payments are correct and on time, hopefully that will ward them off.

I see your logic, but the form doesn't seem to apply to an overpayment situation.

I filled out the whole form, but when I got to the penalty section, it asks for the amount UNDERpaid, and since I OVERpaid, there was no place for me to put the amount. That's why I'm confused.

The instructions for line 19 say "In column (a), enter the tax payments you made by April 15, 2007", and it will be zero in your case.

Say you owe $1000 each quarter. Then all columns of line 18 ("Required Installments") will be $1000. Say you paid your April 15 installment on May 15 but overpaid by $200, but will be on time for June 15 at $1000. So line 19 ("Tax withheld by due date") column (a) will be 0, column (b) will be $2200. So line 25 ("Underpayment) column (a) will be $1000, column (b) will be 0. And line 26 ("Overpayment") column (a) will be $0, column (b) will be $200. Line 27, column (a) will be 30 days. Line 28, column (a) will be 1000*30/465*0.08 5.1612903225806451612903225806452 Line 29, column (a) will be 0. Line 30, column (a) will be 0.

" snipped-for-privacy@yahoo.com" wrote in news: snipped-for-privacy@z24g2000prf.googlegroups.com:

I use an estimated tax excel worksheet sold on the internet. The benefit is in looking at the various ways to reduce the required quarterly estimate. In my case the AI method often works best, but sometimes I switch to 110% prior year, depending on the actual numbers. Once you are late on a payment, the only way out is if you have witholding, and increase it, since you have the option of spreading your witholding equally along the year vice when actually witheld.

I agree that when you fill out 2210, you can see the effect of paying a few days late when you use the long method. Consumer tax software I have used also figures it correctly.

scott s. ..

Okay, I see where my confusion was. I had read it as "enter the tax payments you made FOR April 15" instead of "BY April 15." That changes things. I'll have to fill out the form again and see how it works out.

Thank you very much for your help.