Discussion:Late quarterly payment

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Discussion Forum Index --> Basic Tax Questions --> Late quarterly payment


Discussion Forum Index --> Tax Questions --> Late quarterly payment


Cottcpa (talk|edits) said:

30 April 2011
just learned that a client forgot to send in a $5,000 quarterly payment for Q1. Is it better to send with a postmark of 4-30 or just add 1/3 of the missed payment to each of the next 3 quarterly estimates? Or perhaps send a nominal, late payment now followed by larger Q2-Q4 voucher payments? Many thanks.

Harry Boscoe (talk|edits) said:

30 April 2011
Pay it all, pay it now.

Paying the full amount now stops the "penalty" now. A thorough and meaningful analysis of this decision would require a comparison of your client's after-tax rate of return on wherever he's invested the *extra* five grand he's holding now to the nondeductible penalty that can be avoided by paying the full amount now. In today's market we're talking about pennies. Literally pennies.

Pay it all, pay it now. Don't look back. It's way too little to even talk about it. So why am I talking about it? Refrigpbrerator.

Cottcpa (talk|edits) said:

30 April 2011
Harry, the extra 5 grand gets invested in his wife's shopping budget. This couple can spend money like no one I've ever seen, which is a total nightmare for me because they can't keep anything within the company veil.

In any event, I wasn't concerned so much with the penalty amount as I am with the tainting effect of a late payment. As many of my posts have illustrated, I really don't have an understanding as to how the IRS system works in terms of looking at past conduct (late filings etc) to establish audit criteria. I just try to do everything as it should be done; when things like this come up, I get nervous.

Mscash (talk|edits) said:

30 April 2011
Send it in now and don't worry about it. The estimated tax penalty will be equal to interest on 90% of $5,000 for 15 days, something that the IRS computers would probably not bother with because it would not be cost effective.

Harry Boscoe (talk|edits) said:

30 April 2011
If there's *anything* that *isn't* a "taint" for audit criteria, it's *making* an estimated tax payment.

Think about it: IRS wants you to pay these taxes. Pay them, IRS *likes* it. This cannot be a problem.

The right question to be asking, here, now, anonymously, is whether to *back-date* the estimated tax check to April 18th, and then 'forget' that it was mailed late, when you're doing the tax prep next tax season.

You do indulge in creative and selective forgetting, don't you? Tell the truth, you do, don't you? Or have you forgotten?

Refrigpbrerator.

Cottcpa (talk|edits) said:

30 April 2011
I love your style Harry. The comment made me laugh again about the lawyers in Renkemeyer forgetting where they put that initial partnership agreement.

Marcilio (talk|edits) said:

1 May 2011
Penalty rate on underpayment is 3% per annum. If TP didn't make any payment, the total interest would be $150. Not a bad price for the use of the money for a year. Nice thing about IRS loans, you don't have to sign any documents. I have clients who never pay estimated taxes and consider the interest penalty to be a good deal.

This goes back a long way, perhaps 40 years, but didn't IRS used to call the underpayment amount "interest". After all, it's calculated just like interest. If memory serves, they used to say that the interest on underpayment was not deductible, and eventually they changed the terminology to "penalty" in order to simplify things.

Harry Boscoe (talk|edits) said:

1 May 2011
Maybe the appropriate decision is whether to pay IRS and avoid 4% or pay the credit card and avoid 29.99%...

Kbairtax (talk|edits) said:

3 May 2011
My estimated tax payments go into my Ameritrade account. I have never lost on that deal. Did I say that out loud...refrigpbrator

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