Having missed all quarterly deadlines, can I make 2024 estimated tax payment for both Federal and State (Ga) now (October 2024)?

[NSiw2874]

I retired from large company in February 2024.  I own a two partner LLC and have income from this.  I have been using Turbo Tax for Business to in the past. Because, I had W-2 in the past, I did not do any estimated tax payments.  I realized that I need to do this for the income from LLC and investments.

Question is - It is now end of September 2024, I would like to make 2024 estimated tax payment for both Federal and State (Ga) in such a way that I can mitigate / minimize late penalty.  I need expert advices please - - would be great if I can talk to expert.

[Bsch4477]

Paying now will help mitigate any tax owed when you file. 

https://georgia.gov/pay-estimated-tax
https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

[M-MTax]

Any expert will tell you to pay whatever you owe and is past due ASAP; the sooner the better.

[rjs]

You have not missed all of the quarterly deadlines. The fourth payment for 2024 is due January 15, 2025. That would be to cover the tax on your income in September through December. For your income prior to September you can and should make a payment now, paying the full amount of tax for your income in January through August. Paying now will not eliminate the penalty, since you are paying late, but it will stop the penalty from increasing. It's the best you can do at this point.

[NSiw2874]

I've spent a lot of time to fine ways to pay them (also reading a lot of IRS publications). Thus - thank you Bsch4477 - for quick link to make payment.  Also thanks to other experts for sharing your views - appreciated.

For Federal - from my readings, I found the IRS publication 505 ( https://www.irs.gov/publications/p505 ) that talks about paying estimated tax at 110% of previous year amount to avoid any underpayment penalty. I also understand that "tax withheld" from Roth Conversion can be considered for estimated tax as well.  I hope I have not misunderstood the rules. Any comments / Suggestions ?

For Ga State - I'll do that from the link you provided.

Thanks in advance for your comments / advices

[rjs · Accepted solution]

You didn't mention a Roth conversion before. For determining the underpayment penalty, withholding is treated a little differently from estimated tax payments, and it works to your advantage. If you have tax withheld from a Roth conversion anytime during the year, the withholding is treated as if it was paid evenly during the year, even if you do the conversion in December. So that will reduce the penalty a bit because the withholding is treated as if you paid it earlier in the year. It partially makes up for not having made the earlier estimated tax payments. If you have not done the conversion yet, and you are able to choose how much tax to have withheld, you could reduce your estimated tax payment and increase the tax withheld from the conversion by a corresponding amount. That would further reduce the penalty.

[Opus 17]

The IRS is going to look at your total tax liability, and they will assume that the income was earned evenly over the year.  They will look at your withholding (W-2 or 1099-R) and assume that was also paid evenly over the year, even if it was not.  They will look at payments and assign them the exact date they were received.

Then, the IRS is going to ask, did you have enough withheld and/or payments by April 15 to cover the taxes owed from Jan 1-March 31.  Did you have enough withheld and/or payments by June 15 to cover the taxes owed from April 1-May 31.  And so on.

If you are underpaid in any quarter, the IRS can asses an underpayment penalty of 0.5% per month, and interest currently at 8% APR.  So paying now will help stop any more interest or penalties accruing for the April 15, June 15 and Sept 15 payment deadlines.  And you have plenty of time to make the January 15 payment.

The IRS can assess these penalties for under-paying during the year even if you pay in full later.  But you can also ask for a waiver or abatement if you get a bill for a penalty, such as because your tax situation dramatically changed and it took you time to catch up in good faith. 

https://www.irs.gov/payments/penalty-relief-due-to-first-time-abate-or-other-administrative-waiver

[NSiw2874]

Thank you Opus17 and rjs,

How about State (GA) estimated tax payment?  If I do the payment via link https://georgia.gov/pay-estimated-tax in an amount that is 110% of my state tax last year, will they consider this in a similar manner as IRS Publication 505 to lowering the penalty as well ?  Also, do they have a way for me to submit request to lower (or remove) the penalty.

Thanks in advance

[Opus 17]

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@NSiw2874 wrote:

Thank you Opus17 and rjs,

How about State (GA) estimated tax payment?  If I do the payment via link https://georgia.gov/pay-estimated-tax in an amount that is 110% of my state tax last year, will they consider this in a similar manner as IRS Publication 505 to lowering the penalty as well ?  Also, do they have a way for me to submit request to lower (or remove) the penalty.

Thanks in advance

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You would have to find a Georgia expert, I don't know if any of the usual volunteers here live in Georgia.  I think you would be safe in assuming that Georgia follows the IRS pattern, they might be more lax, but I doubt they would be more punitive.  And states probably have a penalty waiver as well, but you would have to look that up yourself. 

[rjs]

One of the "usual volunteers," @DoninGA, might be able to help with the Georgia questions.

[DoninGA]

Go to this Georgia website for information on a penalty waiver - https://dor.georgia.gov/tsd-3-penalty-waiver

Go to this Georgia website for information on underpayment penalties - https://dor.georgia.gov/penalty-and-interest-rates