estimated tax payment penalty
client paid no est taxes last year. Filed his ext and then paid the total tax in November of $10,000. he couldn’t pay the est tax because he didn’t have the money at the time.
He hasn’t paid any for 2012 either. He wants to start paying est tax again.
[u]Questions[/u]
If he pays any catch up est tax for the 2012 tax period:
a. will he pay a large penalty since no est tax for june, sept?
or
b. should he wait until April 2013 and pay the amount of tax he would owe?
Thank you.
Douglas
Permalink Submitted by Alan Spross on Thu, 2012-11-15 16:44
Not paying in the first 3 quarters for 2012 will produce an underpayment penalty, since is appears that he will not meet any safe harbor to avoid penalty. If his income comes late in the year, he could file a 2210 AI (annualized income installment method) and his penalty will be based only on the shortfall for each quarter rather than under the assumption his income was earned evenly throughout the year.
Also, paying his full estimate by Jan 15th, 2013 for 2012 will stop the underpayment penalties for the last quarter from being added to the earlier quarters.
Permalink Submitted by Douglas Bauerband on Thu, 2012-11-15 16:48
That 2210 could be a real help…thank you.
But do you know the penalties he would be hit with…are they large?