FAQ on Estimated Tax Payments for the Self-Employed: Part II
Estimated tax payments are a dreaded but essential aspect of self-employment. The better you understand how they work, the easier you’ll find it to handle this crucial component of the self-employed lifestyle.
In the initial article from our two-part guide on estimated self-employed taxes, we focused on determining when they’re actually required, plus the process of making these payments.
Now, we’ll cover the flip side of this matter: what happens when estimated taxes aren’t paid on time — and whether penalties can be avoided.
What if I don’t pay estimated self-employment taxes?
The consequences for failing to pay quarterly taxes can be significant. The IRS typically assesses an underpayment penalty. How much this involves, however, can be difficult to anticipate.
It all depends on the amount by which the taxes were underpaid, as well as when this occurred and how much interest has since been allowed to accrue.
What happens if I miss just one quarterly payment?
After missing an estimated tax due date, it can be tempting to wait for the next. Unfortunately, even a brief delay can lead to significant penalties. It doesn’t take long for these fees to accrue, so be sure to make missed quarterly payments as soon as possible.
Is it possible to avoid the IRS underpayment penalty?
In select situations, it might be possible to sidestep the underpayment penalty after neglecting self-employed quarterly taxes. Natural disasters, for example, could be deemed sufficient reason to have missed quarterly payment deadlines. To skip the penalty, you’ll need to submit a waiver request via IRS Form 2210.
As you deal with the complications of self-employed taxes, look to the Highland Tax Group for guidance. We can help you develop the right strategy to minimize your tax burden — and just as importantly, reduce the stress of dealing with the IRS.