Money Monday: 1 Do and 2 Don'ts for Writers Paying Estimated Quarterly Taxes
Last week's Money Monday explained estimated quarterly taxes: who needs to pay them and why. In it, you learned that the four quarterly tax payment deadlines are in April, June, September, and January each year.
Considering the fact that it's July and two estimated tax deadlines have already passed this year, I thought it was only right to follow up with an article on what you should do if you miss a estimated quarterly tax payment deadline.
As a refresher, who should pay estimated quarterly taxes?
If you're a U.S. resident who will owe the federal government more than $1,000 in self-employed income, then the IRS wants you to pay estimated quarterly taxes instead of one lump sum each year.
You can learn how to calculate your estimated tax burden and how to pay for it by reading my previous article.
Now that everyone is caught up, here are 1 do and 2 don'ts to follow when it comes to catching up on missed estimated taxes.
Don't wait until the next quarterly deadline to pay.
Let's say you missed the June deadline for your Q2 estimated payment. If this is true, don't wait until the September deadline to catch up. If you miss a payment deadline even by one day, pay ASAP to avoid any potential interest.
I say this because the rate of interest you'll be penalized accrues daily, so acting quickly will save money (source).
Do explore your penalty waiver options.
If you have missed an estimated tax payment and think you'll owe a penalty, ask your accountant what, if any, penalty waiver options are available to you.
According to the IRS website, some penalties are easily waived, including ones caused by a disaster or other unusual circumstance. You're also likely to have your penalty waived if you're only a few days late and/or you owe a negligible amount (source).
Check out the flowchart on IRS Tax Form 2210 for more information.
Don't panic. This is not the end of the world.
Remember, in the grand scheme of things, your infraction is likely very small. The tax man may seem scary (the phrase "tax audit" makes all of us break into a cold sweat, I'm sure), but really, he just wants your taxes.
The IRS is more lenient about penalties if you don't abuse the system. The worst thing you could do at this point is to not do anything.
We all make mistakes. Instead of being paralyzed by financial anxiety, stand up, dust yourself off, and send in your estimated quarterly tax payment as soon as possible.
This article has explored a topic specific to the American tax code. If you're an international reader with insight to contribute regarding your country's tax code, I'd love to hear from you. Please share your guidance in the comments below.
- If you are interested in having your question answered on an upcoming Money Monday, fill out the form below.
- If this article helped you and you think it’ll help your friends, share it via email and social media.
- If you're a reader with related advice to share, I'd love to hear from you! Share your thoughts in the comments.
I look forward to chatting with you soon!
Jessica Hatch is not a Registered Investment Advisor, Broker/Dealer, Financial Analyst, Financial Bank, Securities Broker or Financial Planner. The information in this blog post is provided for informational purposes only. It is not intended to be and does not constitute financial advice, is general in nature and not specific to you. Ms. Hatch is not responsible for any investment decisions made by you. You are responsible for your own investment research and investment decisions.