
The IRS continues to dig in on having to pay your first quarter estimated tax payment by April 15. Even an overpayment must meet this requirement. We review new IR...
This post is for non-farmers who are required to make quarterly estimated tax payments. Even though the 2020 filing date got extended to May 17, the IRS continues to assert that 2021 first quarter estimated tax payments are still due April 15.
If there was enough paid in by April 15 on your 2020 tax return, then the overpayment will be credited as of April 15. However, if part of the overpayment resulted due to paying your extension after April 15, then that overpayment may subject you to an interest charge (it is called a penalty but it is calculated as interest with a 3% interest rate).
In their first example, they show a $10,000 overpayment that will be credited as of May 17 resulting in a penalty. What they don’t tell you and is even more important is that the penalty for this is …………..$26. Taxpayers and their preparers are spending way too much time trying to pay a first quarter estimate where the penalty might be less than $25.
If you normally pay less than $10,000 in quarterly taxes, simply get your extension worked up as normal and make the payment by May 15. If you try to pay it on April 15 and get it wrong, it will likely cost you substantially more money and time than the penalty will ever cost you.
Now if your expected estimate is let’s say $100,000, then paying the estimate and/or extension on April 15 might make more sense. But remember, even at $100,000 the penalty is only about $250 and you may make more than that on the $100,000 you kept between April 15 and May 17.
The IRS has dug in on their position and will not change their mind. But if your required estimate is under $25,000, our advice is don’t worry about it and pay by May 17, 2021. And if you want your extension overpayment credited as of April 15 (to effectively pay the first estimate), file and pay the extension amount by April 15.
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