Updated: Jan 18
Letters Go Out to Individual Taxpayers
We have had several emails from clients stating that they have received letters from the IRS regarding a failure to pay proper estimated taxes. With the changes to the tax deadline, the letters have caused confusion among many clients.
The letter is NOT referring to the tax filing deadline and tax payment that was changed from April 15, 2020 to July 15, 2020. It was sent to those individuals who failed to make estimated tax payments for the 2019 calendar year.
What is Failure to Pay Proper Estimated Taxes?
Failure to pay proper estimated taxes occurs when you don’t pay enough taxes due for the year with your quarterly estimated tax payments, or through withholding, when required. When this happens and you owe more than $1,000 - the IRS reserves the right to penalize you for not making estimated tax payments during the calendar year.
If your income is received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments. Use Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts. We calculate the penalty separately for each required installment. The number of days late is first determined and then multiplied by the effective interest rate for the installment period.
If you believe that you have received the notice in error, please send upload a copy of the notice to your client portal. If you are unable to upload it to your client portal for any reason, please email Teresa at: TeresaM@TX-CPA.Com.
Planning for 2020 and the Future
Collom CPA can help you plan for 2020 and the future by:
Reviewing your pay stub and investment gains to determine if you need an estimated tax payment
Reviewing your final yearly paycheck and providing you with an estimate. We can also make a payment if needed for you.
Consulting with you if you sell stock and providing you with information needed to make an estimated tax payment at that time.
The next estimated tax due date is September 15, 2020
Read More About: Failure to Pay Proper Estimated Tax, Click Here.
See Publication 505, Tax Withholding and Estimated Tax for more information.
See IRS News Release IR-2019-55 or IRS News Release IR-2019-24 (Farmers and Fishermen) to determine if you meet the criteria for a waiver of this penalty for your 2019 taxes.