[Soon2beCPA]

I was talking to a friend who has a photography gig (she’s been doing it for a little over 2 years ago) about taxes and she mentioned in passing that she only pays her self-employment taxes once a year. I told her she probably needs to be paying quarterly, but she insists that the IRS hasn’t sent her any notices telling her to pay fines and penalties the last two years she’s done this so she thinks it’s fine that she is just paying once a year (she ended up paying about $1300 each year I believe). Does anyone know if a self-employed individual has the option to pay once a year or if maybe she’s just lucky and the IRS just hasn’t gotten round to sending her the interest and penalty notice? It’s been over 2 years since she started paying taxes so surely they would have sent her notices by now? Also, how she can find out if she owes any fines if she’s not getting any notices? We called the IRS together but we were on hold FOREVER and finally gave up…I wasn’t sure if there’s any easier way to figure this out.

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Ethics - 100

BEC - 11/2015 - 82
FAR - 10/1/2016
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[N2BCPA]

I used to work for the IRS and if she owes $1300 every year and she pays it by 4/15 then she is only liable to pay a penalty for failure to make adequate estimated tax payments. This penalty is generally applied when you owe a balance over $1,000. Please see this link: https://www.irs.gov/taxtopics/tc306.html

If she pays by due date and files timely she is not liable for a failure to file or pay penalty.

She can avoid this estimated tax penalty by making quarterly payments every year. She is not supposed to pay the way that she is but many people do. She should get an account trancript for her last two tax years to see what her calculated penalty was. She has likely already paid it as it was probably included in her $1300 balance.

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Roger/ Ninja

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[jm962011]

Is this photography gig her only gig? Or does she have a job where she receives a W-2? If she does receive a W-2, those taxes withheld by her employer might be enough to cover her quarterly requirement. Make sure you read the entire thing that N2BCPA posted because the 4th sentence is important or use this link to answer the questions:

https://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Estimated-Tax/Individuals/Individuals

[Missy]

Also wanted to add not to be so sure she would have heard from the IRS by now if she owed penalties. Maybe but sometimes it can take a few years to hear from them.

Old timer,  A71'er since 2010.

Finance manager/HR manager

 

 

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Soon2beCPA]

Thanks for the help everyone! She's going to see if she can get an account transcript to see what her calculated penalty is so that she can get it paid and start doing quarterly payments.

AUD - 82
BEC - 80
FAR - 81
REG - 85

Ethics - 100

BEC - 11/2015 - 82
FAR - 10/1/2016
AUD - 6/4/2016 - 80
REG - 12/10/2016

[Anonymous]

The calculated penalty may very well already be paid. When I worked in taxes, we had customers who always had underpayment penalties, and our tax software figured it in as part of their overall bill. So, their tax might have been $x, and they paid $x+200, but all they would have understood to tell anyone else (even though we tried to explain) was that their taxes for the year were $x+200.

If the tax software she used was any good, she's probably already paid the underpayment penalty.

[Author]

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