Hello -
I received a notice of interest & penalties for late payment. This is mostly a fact-finding mission to understand what I did wrong since (I thought) I did this in previous tax years and it worked fine.
Using fake but relatable numbers, say my salary is $150,000 in 2023. Then in 2024 Q4 I sold a rental property for $400,000.
I used the 110% rule to pay 110% of my 2023 tax obligation in 2024 Q4 instead of paying estimated tax on the $400,000. Due to some pass-through K1 income, I had to file an extension in April, and I wonder if this is where the issue happened.
When I filed the extension in April, I did not pay any additional tax as I thought I was covered by the Q4 estimated payment (that was 110% of my 2023 tax paid). The interest & penalties notice began charging interest starting April 15th on the outstanding tax for the $400,000.
Looking through previous tax years, I've done this before when I had an abnormally large tax year and I don't recall getting charged interest between April & October. I did some research online for the 110% Rule and couldn't find much about how it works with extensions.
Any ideas? Does the 110% rule not cover you when filing an extension?
