Paying Estimated Taxes

cover my investment income and small side business. However I got an extra job that was large enough that I want to pay several thousand in estimated taxes.

Can I just send the IRS a check from my automated bill pay, listing my SSN as the "Account number," and assume they will be able to match it up at year-end when I claim that I paid $x thousand in estimated tax?

determined that the convenience fee is worthwhile.) However, I saw somewhere that you cannot pay estimated taxes this way, only taxes due with your return. Is this true?

The credit card aside, I have a brilliant suggestion, if I do say so.... Why not submit a W4 at day job, with $X extra withheld each check? If your goal, or part of it, was to avoid the estimated tax form submitting, this would do it for you. As December draws near, another W4. For what it's worth, my W4 is done on line, so no paper and easy to sign in to change prior to next check.

cover my investment income and small side business. However I got an extra job that was large enough that I want to pay several thousand in estimated taxes.

Can I just send the IRS a check from my automated bill pay, listing my SSN as the "Account number," and assume they will be able to match it up at year-end when I claim that I paid $x thousand in estimated tax?

determined that the convenience fee is worthwhile.) However, I saw somewhere that you cannot pay estimated taxes this way, only taxes due with your return. Is this true?

I think my post stated that I usually have enough withheld to cover my taxes, but that this year was unique in that I had some extra income.

I also need to spend a certain amount on a credit card to get a points bonus, and the amount of taxes I would pay would be enough to put me over the top.

but that this year was unique in that I had some extra income.

and the amount of taxes I would pay would be enough to put me over the top.

For most "estimated tax" needs, the issue is that there is no regular job to use payroll to do the withholding. Absent the Credit Card issue, I thought that a good idea.

Drug chains sell a Visa 'Gift' card, with a $4.95 fee on $500 card purchase. This 1% is usually far lower than the fee the tax payment services charge. But that makes this "not a tax question." My card gives me 2%, and I recall thinking to use the card in April, but the fee was even higher than that.

determined that the convenience fee is worthwhile.)  However, I saw somewhere that you cannot pay estimated taxes this way, only taxes due with your return.  Is this true?

IRS Publication 505 says that you can make estimated tax payments by credit card or debit card via telephone or Internet, and the e-pay section of Publication 505 provides links to four approved companies who handle the payments by phone or Internet.

One thing to keep in mind is that paying sufficient tax during the year is not enough to avoid penalties for non-payment in TIMELY fashion, meaning that tax withheld plus four equal timely payments of estimated tax together must equal at least the safe harbor amounts. So, if you have missed the first quarterly payment, you should take penalties and interest into account also. The advantage of having extra withheld from the wages of a regular job (as JoeTaxpayer has suggested but you have rejected) is that withholding can be treated as having paid in four equal timely installments regardless of when it actually occurred. So, extra withholding in the last few months of the year (e,g. after the mutual funds post their estimated year-end distributions) can be used to avoid making estimated tax payments.

Dilip Sarwate

cover my investment income and small side business. However I got an extra job that was large enough that I want to pay several thousand in estimated taxes.

Can I just send the IRS a check from my automated bill pay, listing my SSN as the "Account number," and assume they will be able to match it up at year-end when I claim that I paid $x thousand in estimated tax?

determined that the convenience fee is worthwhile.) However, I saw somewhere that you cannot pay estimated taxes this way, only taxes due with your return. Is this true?

but that this year was unique in that I had some extra income.

and the amount of taxes I would pay would be enough to put me over the top.

I have been under the impression that paying taxes with credit card is considered a "cash advance", not a purchase (which is why you have to pay the credit card merchant fee, not the IRS). Wouldn't that affect eligibility for bonus points?

I wouldn't advise your Option 1. In addition to SSN, they need a tax year for the payment. It might just get sent back to you.

It's a charge.

Hank - the link I offered shows you can use this method for quarterly payments. Two per quarter, actually.

Last year I paid $10,000 in estimated tax and got a $5,000 refund. Yet I had a $12 penalty! I got an extension, so I my first quarterly payment was a few weeks late. I suppose there is no remedy for that except paying the penalty?

On 5/8/2012 9:44 PM, dvsarwate wrote: ...

But if the income isn't distributed throughout the year, isn't it still safe to only pay sufficient estimated in the quarter following the actual income receipt?

suppose there is no remedy for that except paying the penalty?

You can't cure an underpayment by a later overpayment.

To take an extreme example, say you make no payments or withholding for 11.5 months, and then you pay $20,000 on December 15th and end up with income tax of $15,000 and get a $5,000 refund.

You're still going to owe a penalty for being underpaid for almost all of the year, even though you got a refund.

How did you discover you had a $12 penalty?

Did the IRS send you a notice asking for the penalty?

Did your software calculate this penalty?

Other?

suppose there is no remedy for that except paying the penalty?

The "remedy" for that is to have part of your refund applied directly to your estimated taxes when you file your return. The applied amount is credited to your subsequent year tax account as of 4/15 if the funds were on deposit for the prior year by that date.

Ira Smilovitz

The W-4 has a worksheet to help you calculate the number of exemptions to claim, and the worksheet considers your other income (such as income from first job, dividends). As an example, if you have a job that pays $10000 a year and no other income, the number of exemptions to claim is probably 2 or more, but if you have dividend income of $500,000 then the number of exemptions to claim is probably 0, and withhold an extra dollar amount.

Anyway, no one mentioned, but it's a good investment to set up an account at eftps.com. It takes two weeks to set one up as they mail you a PIN number and such in the mail. If you live in CA, then there search for "California webpay" and set up an account there. You can pay estimated taxes, penalties, gift taxes, etc.

cover my investment income and small side business.  However I got an extra job that was large enough that I want to pay several thousand in estimated taxes.

determined that the convenience fee is worthwhile.)  However, I saw somewhere that you cannot pay estimated taxes this way, only taxes due with your return.  Is this true?

Nobody addressed your first question completely. The answer is no. A couple of the banks I use specifically mention that you shouldn't use the billpaying service to pay your federal or state income taxes.

I've seen payments applied incorrectly even though the checks were sent with the vouchers so I bet if you don't have the voucher with the check, the odds of the payment getting misapplied would increase a lot.

Gary