Self-employed taxpayers are generally required to make four estimated tax payments each year. If you miss a payment, you should pay it as soon as possible to minimize underpayment penalties.
What Are Underpayment Penalties?
Underpayment penalties can be charged if you don’t pay enough in taxes throughout the year. These amounts can be charged for each quarter. You could face penalties even when you pay enough throughout the year if you don’t pay enough in a given quarter.
The four estimated tax deadlines are generally:
- April 15
- June 15
- September 15
- January 15 of the following year
For example, you could owe $3,000 for each quarterly estimated tax payment. If you miss the April 15 payment, but then pay $4,000 for your next three payments, you could still face underpayment penalties because your first payment was late.
How to Make Up For a Missed Payment
In the example above, you could also face penalties for the second and third quarters because you didn’t fully make up for the missed payment in the first quarter. This will increase your overall underpayment penalties.
Instead, you should pay the late first-quarter payment in full as soon as possible. Then, pay the full amount of the second-quarter payment on time. Each additional day your payment is late could increase your tax penalties.
If you don’t have the money to make up for your missed payment, you could owe a substantial amount in additional taxes when you file your return. You’ll owe for the tax payments you missed as well as underpayment penalties.
If you find yourself in this situation, take the following steps:
- File your return on time. A late return will only increase your penalties even more.
- Talk to a tax attorney about your repayment options. You may be able to make monthly payments on an IRS installment agreement and/or reduce the amount you owe by requesting penalty relief, among other options.
- Get back on track with your current tax obligations. If you enter into an IRS payment plan, you will also be required to keep up with your current-year estimated tax payments to avoid default.
It’s easy to keep falling further and further behind once you miss a single tax payment. Contact a tax attorney to develop a long-term solution to your tax problems.
The Gartzman Law Firm handles tax debt settlement, payment plans, and other tax resolution cases. Use our contact form to request a consultation with an Atlanta tax resolution attorney.