Income Tax Question

johnnymk · 05-01-2006, 09:04 AM

I will owe more than $1000 this year because of a few investments I have(interest, long term capital gains).

Someone told me that if you owe over $1000, the IRS will penalize you for the entire amount you owe for that year. But I know people that regularly owe over $1000 and I don't believe they are penalized.

cheapie · 05-01-2006, 09:06 AM

what? you mean you haven't filed an extension?

johnnymk · 05-01-2006, 09:10 AM

Quote:

Originally Posted by cheapie

what? you mean you haven't filed an extension?

This will be for the Year 2006

Butch · 05-01-2006, 11:35 AM

Quote:

Originally Posted by johnnymk

This will be for the Year 2006

I think Cheapie's point is that you haven't actually asked a question in your 'question.' There also needs to be a bit more detail/clarity in the situation.

Taxes are complex

. . . I'm having a b*tch of a time trying to file my German and US taxes this year . . . loads of fun!

johnnymk · 05-01-2006, 11:51 AM

OK, if I owe $1000 or more, is there a penalty on top of the $1000 or more?

cheapie · 05-01-2006, 11:53 AM

are you asking if you don't pay the $1,000 or more on time, is there a penalty for not doing so?

Cubsfan · 05-01-2006, 11:55 AM

I think he's asking that, if, after doing taxes, he owes $1k or more, does the IRS have a penalty because he withheld too much. I think the answer is no. (Especially at that low level).

I think that self employed people who estimate their taxes may get a penalty if they are too far off, but other than that I don't think so.

johnnymk · 05-01-2006, 12:02 PM

Quote:

Originally Posted by Cubsfan

I think he's asking that, if, after doing taxes, he owes $1k or more, does the IRS have a penalty because he withheld too much. I think the answer is no. (Especially at that low level).

I think that self employed people who estimate their taxes may get a penalty if they are too far off, but other than that I don't think so.

I always pay my taxes on time. Is anyone absolutely sure that there is no penalty? The guy that told me is a guy who does income taxes for a living, although I may have misunderstood him.

mcs328 · 05-01-2006, 12:51 PM

My co-worker paid interest on top of what she owed I think. Is that what you mean? Owing X amount to the IRS and owing addition interest based on X?

guiseppewv · 05-01-2006, 01:31 PM

Quote:

Originally Posted by johnnymk

I will owe more than $1000 this year because of a few investments I have(interest, long term capital gains).

Someone told me that if you owe over $1000, the IRS will penalize you for the entire amount you owe for that year. But I know people that regularly owe over $1000 and I don't believe they are penalized.

I think as long as you pay more tax ahead of time (e.g. quarterly payments, withholdings, etc...) this year than you did last year then you will not get penalized. Don't quote me on that but I think I remember reading that.

johnnymk · 05-01-2006, 01:39 PM

I don't pay quarterly. It is deducted from my check monthly.

guiseppewv · 05-01-2006, 02:15 PM

Quote:

Originally Posted by johnnymk

I don't pay quarterly. It is deducted from my check monthly.

Which is a withholding. I don't think you will have to pay.

Quote:

The United States income tax is a pay–as–you–go tax, which means that tax must be paid as you earn or receive your income during the year. There are two ways to pay as you go. One is through tax withholding and the other is through estimated tax payments. Topic 355 provides information on paying estimated tax. If you do not pay enough tax through withholding or estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will have paid enough tax to avoid this penalty if they have paid at least 90% of the tax shown on the return for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. Please refer to Publication 505 for more information on paying estimated tax payments. There are also special rules for farmers and fishermen.

Additionally, the payments must usually have been in approximately four equal amounts to avoid a penalty. However, if you made unequal payments because your income was received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income. Use Form 2210 (PDF), Underpayment of Estimated Tax by Individuals and Fiduciaries, to see if annualizing would reduce or eliminate the penalty.

The penalty may be waived if:

The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
You retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.

http://www.irs.gov/taxtopics/tc306.html

johnnymk · 05-01-2006, 02:21 PM

Thanks, that link seems to answer my question.

guiseppewv · 05-01-2006, 02:30 PM

Glad to help.

Markel · 05-01-2006, 06:38 PM

Johnny,

If you expect to owe on this year's taxes, is there any way you can increase your withholdings on each check for the remainder of this year? If you have an extra $150 withheld each month for the last 6 months of the year, that should negate what you would expect to owe. When dealing with the IRS, my policy is "Better safe than sorry."

johnnymk · 05-01-2006, 07:08 PM

Quote:

Originally Posted by Markel

Johnny,

If you expect to owe on this year's taxes, is there any way you can increase your withholdings on each check for the remainder of this year? If you have an extra $150 withheld each month for the last 6 months of the year, that should negate what you would expect to owe. When dealing with the IRS, my policy is "Better safe than sorry."

I increased my withholdings about 18 months ago in anticipation of expected additional interest and it worked great for 2005. But I am probably going to cash in my silver this year on top of the interest I will be receiving. This will just be a one shot increase of revenue this year. I really don't want any increased withholding for this year and subsequent years. But if I have to, I will do it.

Markel · 05-01-2006, 07:22 PM

Quote:

Originally Posted by johnnymk

I really don't want any increased withholding for this year and subsequent years. But if I have to, I will do it.

At the beginning of next year, you could knock it back down.

clutchy · 05-01-2006, 10:46 PM

it depends. I think if you owe anything over 900 or so you get penalized. Sometimes you'll have to make quarterly estimated payments... although i've never seen that.

VTGreg · 05-02-2006, 06:22 AM

I had to pay a penalty this past year. I don't recall if it was a fixed amount over what was withheld or had to be within a percentage of what was withheld(I think it was a percentage).

You can either increase your withholding or make prepayments so you don't have to incur the penalty. However, the penalty is calculated based on when you pay your taxes so the earlier you pay your taxes, the less the penalty. Also, the penalty is not ridiculous. I had to pay an additional $2000 this year and my penalty was less than $20.

guiseppewv · 05-02-2006, 08:43 AM

Quote:

Originally Posted by clutchy

it depends. I think if you owe anything over 900 or so you get penalized. Sometimes you'll have to make quarterly estimated payments... although i've never seen that.

See post #12.

clutchy · 05-02-2006, 10:43 AM

Quote:

Originally Posted by guiseppewv

See post #12.

i knew not reading that big post was going to bite me...

johnnymk · 05-02-2006, 10:52 AM

Even after reading everything, including the IRS website, I am still confused.

clutchy · 05-02-2006, 10:55 AM

Quote:

Originally Posted by johnnymk

Even after reading everything, including the IRS website, I am still confused.

penalties are ridiculously small, an annoyance mostly. I wouldn't worry too much about it. Maybe just pay in a little extra?

05-01-2006, 09:06 AM	#2
cheapie Chief of Naval Operations Join Date: Aug 2002 Location: raising my pimp hand strong Posts: 13,038	what? you mean you haven't filed an extension? __________________ 70% of the world is covered by water. The rest is covered by Bob Sanders

05-01-2006, 12:51 PM	#9
mcs328 Admiral Join Date: Feb 2001 Location: Maryland Posts: 6,578	My co-worker paid interest on top of what she owed I think. Is that what you mean? Owing X amount to the IRS and owing addition interest based on X? __________________

05-01-2006, 06:38 PM	#15
Markel Chief of Naval Operations Join Date: Feb 2001 Posts: 11,733	Johnny, If you expect to owe on this year's taxes, is there any way you can increase your withholdings on each check for the remainder of this year? If you have an extra $150 withheld each month for the last 6 months of the year, that should negate what you would expect to owe. When dealing with the IRS, my policy is "Better safe than sorry." __________________ stay low... keep moving...

05-01-2006, 10:46 PM	#18
clutchy Rear Admiral Lower Half Join Date: Dec 2000 Location: Yucaipa, CA Posts: 2,863	it depends. I think if you owe anything over 900 or so you get penalized. Sometimes you'll have to make quarterly estimated payments... although i've never seen that. __________________ LK was treated unfairly thanks X

05-02-2006, 06:22 AM	#19
VTGreg Rear Admiral Lower Half Join Date: Jun 2002 Location: Charlotte, NC Posts: 2,533	I had to pay a penalty this past year. I don't recall if it was a fixed amount over what was withheld or had to be within a percentage of what was withheld(I think it was a percentage). You can either increase your withholding or make prepayments so you don't have to incur the penalty. However, the penalty is calculated based on when you pay your taxes so the earlier you pay your taxes, the less the penalty. Also, the penalty is not ridiculous. I had to pay an additional $2000 this year and my penalty was less than $20. __________________ It only ends once... Anything that happens before that is just progress. Courage is not the absence of fear but rather the judgment that something else is more important than fear.

05-01-2006, 09:04 AM	#1
johnnymk Chief of Naval Operations Join Date: May 2000 Location: LEVITTOWN< PA> USA Posts: 13,621	Income Tax Question I will owe more than $1000 this year because of a few investments I have(interest, long term capital gains). Someone told me that if you owe over $1000, the IRS will penalize you for the entire amount you owe for that year. But I know people that regularly owe over $1000 and I don't believe they are penalized. __________________ “Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.” (Winston Churchill)

05-01-2006, 11:51 AM	#5
johnnymk Chief of Naval Operations Join Date: May 2000 Location: LEVITTOWN< PA> USA Posts: 13,621	OK, if I owe $1000 or more, is there a penalty on top of the $1000 or more?

05-01-2006, 11:53 AM	#6
cheapie Chief of Naval Operations Join Date: Aug 2002 Location: raising my pimp hand strong Posts: 13,038	are you asking if you don't pay the $1,000 or more on time, is there a penalty for not doing so?

05-01-2006, 11:55 AM	#7
Cubsfan Rear Admiral Lower Half Join Date: Jul 2001 Location: Colorado Posts: 2,743	I think he's asking that, if, after doing taxes, he owes $1k or more, does the IRS have a penalty because he withheld too much. I think the answer is no. (Especially at that low level). I think that self employed people who estimate their taxes may get a penalty if they are too far off, but other than that I don't think so.

05-01-2006, 01:39 PM	#11
johnnymk Chief of Naval Operations Join Date: May 2000 Location: LEVITTOWN< PA> USA Posts: 13,621	I don't pay quarterly. It is deducted from my check monthly.

05-01-2006, 02:21 PM	#13
johnnymk Chief of Naval Operations Join Date: May 2000 Location: LEVITTOWN< PA> USA Posts: 13,621	Thanks, that link seems to answer my question.

05-01-2006, 02:30 PM	#14
guiseppewv Admiral Join Date: Nov 2001 Location: East coast Posts: 7,116	Glad to help.

05-02-2006, 10:52 AM	#22
johnnymk Chief of Naval Operations Join Date: May 2000 Location: LEVITTOWN< PA> USA Posts: 13,621	Even after reading everything, including the IRS website, I am still confused.

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