Question

2020 Federal Estimated Taxes

Forum|Forum|5 years ago
January 9, 2021
1 reply
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Perhaps a different view on these with my question forthcoming; my wife and I file jointly, with our jobs withholding taxes throughout the year. Because of that, we did not (and have never) made estimated tax payments over the year.

As I review our full year 2020 finances/taxes today, it appears our withholding at the federal level will be short of my estimates for the year ($1K < x < $5K). This occurred even after some mid year adjustments to our W4 withholdings. We will, however, have paid ~90% of our estimated liability for the year.

My question is; if I decide to cover us by making just one estimated payment to the IRS before the 1/15/2021 deadline, is that viewed negatively, or said differently, is the IRS ok with just one estimated payment (vs. 4)? My gut tells me the IRS prefers this situation vs. the opposite, and yes, I realize I potentially lose a few months of low % interest on this by paying vs. holding until 4/15/2021.

Thanks

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NCPERSON1

in a way they do view it negatively, and there is nothing you can do about it

say you realize you owe $4000 and make that payment on 1/15/21. They way Form 2210 works (where any interest is determined), they assume your income was the same each quarter and determine how much you were under withheld each quarter and assess interest accordingly. Penalties only occur if you do not pay by 4/14/21, so we are not there yet.

So paying $4000 cuts off the interest clock from 1/15/21 forward, but doesn't change whatever interest MAY BE due from the past months. Because of COVID, the first and 2nd payments weren't due until 7.15.20 so the interest will be less than the same situation in another year.