@TomYoung Thank you for that, greatly appreciated.
Please correct me here, but if I pay off all my estimated taxes due on (say) Oct 15, 2020 for Q1-Q3, then it sounds like I will owe:
- 5% interest for Q1 from July 15, 2020 (date of extension) through Oct 15, 2020 (the date I pay off the Q1 installment)
- 5% interest for Q2 from July 15, 2020 (date of extension) through Oct 15, 2020 (the date I pay off the Q1 installment)
- 5% interest for Q3 from Sept 15, 2020 through Oct 15, 2020 (the date I pay off the Q1 installment)
- 3% interest for Q4 starting Jan 15, 2021 (will not be applicable if I make this payment on time)
So if my 1099 income is 100K for 2020, and my taxes due are $40K (lets say, 40% tax rate), then the IRS will charge interest:
- 5% of 10K for Q1 (for 3 months, July 15 - Oct 15) = $125
- 5% of 10K for Q2 (for 3 months, July 15 - Oct 15) = $125
- 5% of 10K for Q3 (for 1 month, Sept 15 - Oct 15) = $41.67
Total interest for late payment: $291.67
Am I off-track here? Anything I am missing?
Also I'm confused when the interest starts accumulating, according to this article: https://www.irs.gov/businesses/small-businesses-self-employed/interest-for-individuals
it says that "interest starts on April 15, if your return shows you owe tax."
But it also says: "Interest on the failure to pay, estimated tax, and dishonored check penalties starts on the notice date of that penalty amount." - I haven't received any notices from the IRS.
Is there a way to find out how much interest I owe for my late payment? Or do I have no choice but to wait until tax time (April 2021) when I file my return?
@TomYoung @Carl thank you for any further clarification here.
