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Quarterly tax question for CPA’s
Posted on 7/14/20 at 8:26 pm
Posted on 7/14/20 at 8:26 pm
Every quarter for seven years I have prepaid my federal and state taxes like a good little soldier. My cpa has always told me if I don’t prepay I will have to pay a penalty. Needless to say, I’m not exactly thrilled to send 40-50k each quarter to the federal/state government right now. Been thinking about throwing the cash in a VTSAX for the remainder of the year and just paying in full next spring. So what exactly is this penalty? A percentage of profits? A set dollar amount? How stiff of a penalty am I looking at? I appreciate any info given.
5
Posted on 7/14/20 at 8:31 pm to ykevin25
quote:
My cpa has always told me if I don’t prepay I will have to pay a penalty.
what did your CPA say when you asked him about the amount of the penalty?
Posted on 7/14/20 at 9:21 pm to ykevin25
The irs will calculate what you should have paid in each quarter and charge interest on the amount. So the amount you don’t pay for the first quarter will have higher interest penalties than the final estimated payment because there were more months to accrue interest. The rate is published somewhere on the irs website but it changes every so often based on prevailing interest rates.
Posted on 7/14/20 at 11:26 pm to ykevin25
I owed about $500 penalties and interest for a $16,500 tax liability this year- didn’t make any estimated payments in 2019.
A little risky since the market could lose, but It could definitely work out in your favor, too
A little risky since the market could lose, but It could definitely work out in your favor, too
Posted on 7/15/20 at 7:56 am to ykevin25
quote:
I’m not exactly thrilled to send 40-50k each quarter to the federal/state government right now.
Subtle brag
Posted on 7/15/20 at 10:33 am to ykevin25
The federal rate varies each quarter, for Q1 and Q2 2020 it was 5 percent, but for Q3 it's going to be 3%. You figure out how much you should have paid each quarter, and that's the rate you use for that quarter, from the due date for that quarter payment, until the date it is actually paid. So really it's 4 different penalties.
Louisiana follows the same formula, but the rate is a stupid 12 percent.
So, you just need to consider investment gains vs paying now. Keep in mind those investment gains will be taxed as well.
Louisiana follows the same formula, but the rate is a stupid 12 percent.
So, you just need to consider investment gains vs paying now. Keep in mind those investment gains will be taxed as well.
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