topic Yes, you understand correctly! in Retirement tax questions

Do I need to prepay estimated taxes from 1099 income, if I didn't earn most of the income until after 10/01/18? Can I just file 2018 taxes and pay the liability then?

roughashlar — Sat, 01 Jun 2019 15:44:51 GMT

So I worked for a company from 1/1/18 through 8/1/18 as a W2 employee. I then left but did some part time consulting for them as a 1099. I billed and was paid for just over $70k, almost 75% of which after 10/1/18. I really don't know how to go about making any prepayment of estimated taxes for 2018, since it's already past at this point; wouldn't it just be better to file my taxes and pay the determined liability? I want to avoid any underpayment penalties or AMT, if they apply here.

If relevant to the timing, I will not be able to file taxes until early to mid april (K-1s that are frequently revised in February and March).

As long as you pay whatever tax is due by April 15, you w...

DDollar — Sat, 01 Jun 2019 15:44:53 GMT

As long as you pay whatever tax is due by April 15, you will only be subject to an underpayment penalty for the later part of the year. That "penalty" is really just interest on the tax you should have paid. The current rate is 5% APR. Any tax unpaid after April 15 will be subject to interest and a late payment penalty of 0.5% of the unpaid tax for each month or part thereof that the tax remains unpaid. This is in addition to interest.

It is very easy to make a tax payment online. To do so, go to: https://www.irs.gov/payments

Ok, so the 5% APR would be from the time I received until...

roughashlar — Sat, 01 Jun 2019 15:44:55 GMT

Ok, so the 5% APR would be from the time I received until the time I file and pay? so we're talking roughly $70-80 per month (70k x 5% annual / 12 mo)? If I send the payment now, I'm avoiding the juice continuing to flow. If I pay later, it's just interest. No major penalties, as long as I pay it.

Yes, you understand correctly!

DDollar — Sat, 01 Jun 2019 15:44:56 GMT

Yes, you understand correctly!

If you get hit with a penalty. You might be able to elim...

VolvoGirl — Sat, 01 Jun 2019 15:45:00 GMT

If you get hit with a penalty. You might be able to eliminate it or at least reduce it. You can go to Federal Taxes tab or Personal tab, under Other Tax Situations and select Start by the Underpayment Penalties. You will answer a series of questions that may reduce or eliminate the penalty. Or you can elect to have the IRS figure the penalty for you. It's form 2210.

It's under
Federal or Personal (for Home & Business Desktop)
Other Tax Situations
Additional Tax Payments
Underpayment Penalties - Click the Start or update button

The penalty is based on when you got the income. since y...

VolvoGirl — Sat, 01 Jun 2019 15:45:02 GMT

The penalty is based on when you got the income. since you got a lot of it later in the year you might be able to reduce the penalty by entering when you got the income. Also it is just an estimated amount. The IRS May send you a bill for some more depending on exactly when they get your Tax due payment. Or even send you a refund.

Thanks. That's helpful for when I'm actually filing, righ...

roughashlar — Sat, 01 Jun 2019 15:45:03 GMT

Thanks. That's helpful for when I'm actually filing, right? Not something I'd do ahead of time right now.

You're welcome. I'm glad you found it helpful! You can...

DDollar — Sat, 01 Jun 2019 15:45:09 GMT

You're welcome. I'm glad you found it helpful! You can use it for Estimated Tax payments, payments made when you file, prior year returns, etc. If you want to stop the meter on the interest you owe, you could go ahead and pay now.