IS there a penalty if I send quarterly payments late?

[lorinye]

I just paid 2 quarters of federal estimated taxes at once. Is there a penalty for not mailing the quarterly payments before the date they are due? Also, I owe Oregon quarterly payments, and hove not made any payments yet. Is there a penalty for that? Do you have the address of where I send these Oregon state quarterly payments to?

[Tax Hero Niki]

Hi lorinye!

Excellent question. The government operates as pay-as-you-go. As income is collected, they require their cut at least on a quarterly basis. That also means that there is an underpayment penalty for not paying the tax liability in the same quarter the income is received. The penalty for underpayment of quarterly taxes is based on the tax liability outstanding, calculated in three-month intervals. If your business has a net profit (income minus expenses), then you should consider making quarterly payments.

TurboTax has tools for this. Check out the Self Employment Tax Calculator or TaxCaster Tax Calculator. They will help you determine how much to pay and when.

[conniem123]

Hi lorinye!

Thank you for your questions today!

While there is no penalty for mailing your estimated tax penalty late, there is an underpayment penalty which will depend on how much you owe and how long you have owed it to the IRS.

This underpayment penalty is calculated when you prepare your tax return. The safest option to avoid an underpayment penalty is to aim for "100 percent of your previous year's taxes." If your previous year's adjusted gross income was more than $150,000 (or $75,000 for those who are married and filing separate returns last year), you will have to pay in 110 percent of your previous year's taxes to satisfy the "safe-harbor" requirement. If you satisfy this test, you won't have to pay an estimated tax penalty, no matter how much tax you owe with your tax return.

If you expect your income this year to be less than last year and you don't want to pay more taxes than you think you will owe at year end, you can choose to pay 90 percent of your current year tax bill. If the total of your estimated payments and withholding add up to less than 90 percent of what you owe, you may face an underpayment penalty. So you may want to avoid cutting your payments too close to the 90 percent mark to give yourself a safety net.

If you expect your income this year to be more than your income last year and you don't want to end up owing any taxes when you file your return, then make enough estimated tax payments to pay 100 percent of your current year income tax liability.

Oregon also assesses underpayment penalty.  You can make your OR state payments on their website,  https://www.oregon.gov/dor/Pages/Payments.aspx  , or you can mail a check or money order to: Oregon Department of Revenue. PO Box 14003. Salem OR 97309-2502.

I hope this information is helpful.  Have a great day!

Connie

[Terri Lynn]

Hi Lorinye, 

Thanks for your questions!

1. "I just paid 2 quarters of federal estimated taxes at once. Is there a penalty for not mailing the quarterly payments before the date they are due?" 

The IRS expects you to pay each quarterly estimate by the deadline for that quarter. If you miss one, you should  make the quarterly tax payment as soon as you can.

Some people think, “Well, I already missed this quarterly payment. I’ll just wait until next quarter to make it up.”

Unfortunately, that's a big mistake.

Why? Because the underpayment tax penalty is calculated by:

• How much you you owed, and 
• How long it took before you finally paid. 

In other words, you’ll pay more the longer you wait.

Once a due date has passed, the IRS will typically charge, 0.5% of the entire amount you owe. 

For each partial or full month you don’t pay the tax in full, the penalty increases. It's capped at 25%.

What we listed above are rules of thumb that will help you get a sense of your potential penalty. But the actual penalty will fluctuate.

That's because it includes interest for missed payments, and the interest rate can change from quarter to quarter.

Penalties are based on the quarter — not the year

It's entirely possible to pay the correct amount for the year, but still get penalized for underpayment in a specific quarter.

To take things further, you can even overpay your taxes for the year as a whole, and still get penalized, if you you were short for any individual quarter.

2." I owe Oregon quarterly payments, and hove not made any payments yet. Is there a penalty for that?"

You will owe a 5 percent late-payment penalty on any Oregon tax not paid by the original due date of the return, even if you have filed an extension. If you file more than three months after the due date (including extensions), a 20 percent late-filing penalty will be added.

For more informaion pertaining to quarterly estimates and penalties, you can chec out these links:

Understanding Quarterly Taxes 

Underpayment of Estimated Taxes IRS 

Oregon Penalties and Interest 

Please let me know if you hav any additional questions or need further clarification, lorinye.

Thanks,

Terri H. 

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