[thawdar]

hi everyone

I was not aware of this penalty until I started studying for reg. I under withheld appro $2500 after exemptions. I m so stupid and now I am freaking out. How much do u think I will get penalty for my stupidity?

Any advise would b appreciated.

Merry Xmas.

[Anonymous]

Last year I put my information in at work and the total came to owing just over $1,000, the penalty would have been $8, however, my husband had the lifetime learning credit which brought us a couple hundred below $1,000 and no penalty. You can also try doing an estimated payment before January 15, you may still have a penalty, but it would be less. I'm assuming there is no way to change your withholdings at work at this point too. I didn't see the 2014 information on the irs.gov website, but you may want to try searching there for insight.

[Anonymous]

Sending in an estimated payment now (aka before Jan 15) will definitely help you. I've been out of the tax side of things for too long to remember how much of a difference it makes, but it definitely helps.

However, make sure you really did under withhold first – when first learning the tax law, it can be confusing, so if this is based on a quick study-worried calculation, I'd suggest looking up a tax calculator (like the TurboTax estimators or something like that) and see if it comes out close to what your figures were.

[thawdar]

Thank you So much for advice both!!! I only have one w2 and I messed up with my withholding. I tried to do my last pay stub year to date and I will owe $2500 approx. I am wondering if I do estimated tax payment and while I file tax return, I have to pay again for the amount due ? Any advice on this? Thank you again

[Anonymous]

Nope – if you do an estimated tax payment, then it'll count like withholding. So, let's say your total tax withheld was $3000 and you send in a $2500 tax payment in addition, then if your total tax & penalties liability for the year was $5495, you'd get a $5 refund, same as if it was all withheld. Estimated tax payments show up right below withholding on the tax return (W/H is Line 62 on the form I'm looking at; estimated payment is Line 63).

[thawdar]

Thank you Lilla. So much for helping me out. I am worried that I will be owing thousands of dollars for penalty coz of my stupidity 🙁

[mw798]

You'll be fine if you send in the $2,500 now. Also, don't forget do an estimated payment for your state taxes as well.

With that said, I believe you're okay for the Federal side without doing the estimated payment if you have paid at least 100% of last year's tax liability. However, this doesn't apply to most states so you'll have to do an estimated payment for the state side regardless.

[Anonymous]

Oh goodness no, not nearly that much. Failure to pay penalties add up quicker, but underpayment won't be that bad. I just pulled up the form and looks like the penalty rate is a 1.995%, so about $50 of penalty on $2500 underpayment, if you use the “short form” version of the calculation. I know that it can get complicated with needing to figure how much was paid when and pro-rating the penalty etc., and don't remember all the details, but looks like you'll be in the neighborhood of $50 or so. Like I said, I've been out of tax for a bit so don't trust myself to know all the ins-and-outs, but I can assure you it's not going to be thousands! Here's the form: https://www.irs.gov/pub/irs-pdf/f2210.pdf and instructions: https://www.irs.gov/pub/irs-pdf/i2210.pdf if you're curious to see more about it. From looking over those, I'd almost want to say that if you make the estimate you won't have a penalty, but my memory is that you'd still have the penalty so not sure whether to trust my memory or my reading comprehension more. 🙂

[thawdar]

Thank you! Thank you! Thank you!!! I was so worried about penalty That I will get charged thousands for. Make me relief a bit now. Thank you very much. I will try to do estimated tax payment. I will be able to do the payment right? I saw its for self employment, interest or dividend that doesn't withhold taxes so I just want to make sure. Thank you again. I was feeling miserable on Xmas day. Happy holiday!!!!

[monsterE]

If you claim to many allowances and owe at the end of the year, does it effect your cpa license in anyway?

[Anonymous]

@monsterE As long as you pay the tax when it's due, that shouldn't be an issue.

@thawdar Yeah, the estimate forms can be used by anyone. Here's the form: https://www.irs.gov/pub/irs-pdf/f1040es.pdf #1 under “General Rules” says it should be used by anyone who anticipates their tax due will be $1000 or more. Generally, people who are self-employed or have large amounts of unearned income (like interest and dividends) will be more likely to run into this, since W-2 employees can avoid it by having their withholding done correctly. Just make sure that next year your withholding is correct. 🙂

[thawdar]

THANK YOU SO MUCH for your help Lilla!

[Author]

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