I missed making estimated payments for all quarters. I am going to file the 4th quarter. Should I file earlier three quarters also or pay late fee with 1040? I prefer to pay the penalty with 1040. I can also have my employer do larger withhold in last quatrter as it is a small company.
In article you write:
Withheld taxes are generally treated as paid equally over the year, even if they weren't, so yes, tell your employer to withhold as much as possible up to the amount you'll owe, and pay the rest that you owe (if any) with the 4th quarterly.
You calculate the penalty on Form 2210. It's fairly complicated, see the instructions in pub 505 here:
Will employer doing excessive deposit of payroll in last quarter cause any issue. I do not want to put them in jeopardy,i know they will if I ask.
I've done things like this a number of times, there was never any issue.
If you file the long form 2210, you report your income/deductions in each quarter, and the penalty for that quarter is based on the number of days the payment was due to when it was paid. So if a payment was due 4/15/2013 and you pay it on 12/10/2013, the interest penalty is based on the number of days between these two dates. So yes, it makes sense to pay those 3 installments as soon as possible.
If you file the short form 2210, the penalty is based on when the final payment is made. Final payment is due on 4/15/2014, but if you file early, say on 1/15/2014 (paying all of the tax due), then the penalty is reduced. You can use the short method if you made no estimated payments at all, or timely payments and each payment was the same amount.
If we're talking large amounts here, then it might be good to do some calculations.
Then do so. Actually, I'd just file the return without calculating the penalty. They will calculate it and bill you.
Phil Marti VITA/TCE Volunteer Clarksburg, MD
Getting your employer to withhold "for the whole year" should get you the best result, possibly even a *zero* penalty. See Form 2210, and the rules for how withholding is allocated over the quarters.
*Withholding* is the winner, hands down.
I agree. I retired from Lucent and their pension site let's you adjust the withholding amount at any time. As long as you make the change before the 15th, it will be reflected in the current month.
I highly agree. If you don't file a 2210, there is a very good chance that the IRS won't even bother to impose a penalty (hard to believe but true). If you file a 2210 that shows you owe a penalty then the IRS will want the money.
"For withheld federal income tax and excess social security or tier 1 railroad retirement tax (RRTA), you are considered to have paid one-fourth of these amounts on each payment due date unless you can show otherwise."
Any amount withheld *now* will be considered to have been withheld, basically, ratably over the whole year.
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