Is it too late to pay estimated tax for 2023?

[lunac0231]

I didn't pay any estimated tax for tax year 2023 and now I realize that I will incur a penalty . I read up online that the 2023 Q4 estimated tax deadline is Jan 16th 2024, can I pay estimated tax now to cover the entire  2023 or is it too late to avoid a penalty?

Thanks so much!

[Mike9241]

You can pay now to reduce or eliminate the penalty for the 4th quarter and reduce, but not eliminate, the penalties for the first 3 quarters. 

[lunac0231]

Thanks @Mike9241 , is my understanding correct that even if I pay enough estimated taxe now to cover my entire year of owed tax for 2023, I still need cannot avoid penalties?

[Mike9241]

an estimated tax payment uses the date paid to determine penalities for the current and prior penalty periods.  Withholding by default is spread equally throughout the year unless the taxpayer elects to use actual withholding for each penalty period. 

penalties are calculated from the due date to the date paid. so, if you have no withholding, for quarter 1 the penalty would be from 4/17/23 until the date paid. (Not that certain disater areas had an extended date to make payments)

you can use the annualized income installment method on page 3 of the 2210 if that will reduce your penalties. It must be used for all 4 quarters so it's usually only beneficial when a substantial portion of your income is earned in the 3rd or 4th quarter. 

[Opus 17]

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@lunac0231 wrote:

Thanks @Mike9241 , is my understanding correct that even if I pay enough estimated taxe now to cover my entire year of owed tax for 2023, I still need cannot avoid penalties?

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It's a bit complicated and we don't know all your facts.  In general, the IRS assumes income is earned evenly over the year and that taxes should be paid evenly.  So you may be assessed a penalty for underpaying during the year even if you pay in full by January 15. 

If your income was uneven (more in some quarters and less in others), you might be able to reduce your penalties by using the "annualized" penalty calculation method.

Also, if this is the first time you will have owed a penalty, I suggest that if Turbotax suggests you owe a penalty and offers to include it for you, that you decline the calculation and wait and see if the IRS bills you for a penalty.  At that point, you can apply for a waiver for cause or as a first-timer.  (It's easier to apply for penalty abatement when you get a bill, hard to apply for relief after you already paid it.)