topic Quarterly Payment Penalty in Self employed

Quarterly Payment Penalty

7evin337557 — Wed, 30 Aug 2023 17:21:02 GMT

I make uneven quarterly tax payments based on income I earn each quarter, as it is unknown and all over the place. However, I always get a penalty on my return for it. What can I do to avoid this penalty?

Re: Quarterly Payment Penalty

VolvoGirl — Wed, 30 Aug 2023 17:23:14 GMT

You might be able to eliminate it or at least reduce it. You can annualize your income and payments. 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 from 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

If you have the desktop program you can switch to Forms Mode (click forms in the upper right (left for Mac)) and open the 2210 form. If the 2210 doesn't show up in the left column, click on Open Forms at the top of the left column. Type 2210 in the search box and open the 2210 form. Check box C to let the IRS calculate it.

Re: Quarterly Payment Penalty

Stephanie CPA — Wed, 30 Aug 2023 17:23:50 GMT

Hello, @7evin337557 !

Great work making quarterly estimated payments and keeping track of income for your business!

Can you give more details on the penalty? Is it an underpayment penalty? For federal or state?

Look forward to answering your question!

Re: Quarterly Payment Penalty

7evin337557 — Wed, 30 Aug 2023 17:31:54 GMT

It always states underpayment but I always receive a refund.

Re: Quarterly Payment Penalty

rschule1 — Wed, 30 Aug 2023 17:33:30 GMT

Hi There:

Theoretically there should be no penalty if you are making timely estimated tax payments, (which is calculating your tax liability and and making a timely and appropriate payment). If you are already doing this, then it might be a situation of employing the annualized installment method to avoid estimated tax penalties. In the below link see annualized installment method.

Annualized Method

Re: Quarterly Payment Penalty

7evin337557 — Wed, 30 Aug 2023 17:38:54 GMT

Thank you. Quick follow up question. Do I continue making payments like always then? It states the annualized method selection is made during tax time, so I wanted to make sure I don’t do anything different as of now. Also, is there anything I can do to get the penalties back that I was charged for in previous years or is that long gone?