What penalties must I pay for late taxes?

Question

Hello, I've been doing contracting work since late January and only have just realized that I should have been paying taxes quarterly. I've saved money and have every intention of paying the taxes for them and realize now that I will be penalized. In general, what will I have to pay (interest, penalties)?

Answer 1

First make sure to send estimated tax payment for all the four quarters by January 15, 2008, the date for making fourth quarter payment.

For 2008, the payments are due on April 15, June 15, Sept 15 and Jan 15, 2009. You can send each estimated tax payment equal to one-fourth of your tax for 2007.

If you use a tax software to do your 2007 return, it will automatically print estimated tax vouchers and amount for 2008 estimated tax payments.

Answer 2

If you pay what you owe by 4/15 you won't pay interest.

If you owe over $1000 when you file your return, you'll owe a penalty. There are some exceptions though.

You should have been making quarterly estimated payments throughout the year. The last of these is due 1/15/08 for 2007 taxes. If you pay all that you owe by then, or at least 90% of it or come within $1000, you would very likely slide under the radar for paying penalties even though technically some of it is late.

Answer 3

Estimated tax penalty--about 4% of the total, assuming you pay everything by 4/15. (Any payment you send in by 1/15 will help.)

The EST penalty is 8%, but that's based on 4 payments spread out over the year, so it really works out to half that.

Don't forget to make your first qtr payment for 2008 on 4/15.