Do normal people really pay quarterly estimated taxes?
Maybe this was just a weird blind spot I had for way too long, but I didn't even know individuals were supposed to pay QET. I spend a fair amount of time on finance forums and I've never even seen it mentioned until a few days ago. And I've seen plenty of ads for tax filing services (H&R Block, etc.), and I've never seen one say something like, "Don't forget to pay your quarterly taxes for your side gig!" or something like that. So now I'm reading about it and I feel like I'm in a Twilight Zone episode. I remain skeptical that all poker players and Twitch streamers and guys who happen to have a lot of capital gains one year are duly making their quarterly tax payments, or even know that QET is a thing.
Am I wrong about this? It does seem very easy for the IRS to just automatically hit you with a penalty whenever your tax bill is over $1000 when you file yearly, but maybe they don't? I think I've just been super lucky that I've always been diligent enough about keeping my taxable income so low that I've never had a bill over $1,000 before. So I haven't tested it myself as to whether the IRS just lets it slide usually, or ever.
Any comments?
Smart people don't have to gamble for small wins with their liabilities. They gamble with their assets.
Sure, if you are not in debt, but if you are taking debt, then you might as well borrow from your own "tax fund" rather than letting your money sit in a savings account for tax purposes during the year and taking debt at a higher interest rate.
Didn’t think this was a big deal until I went through a government background check and they gave me a hard time for paying late with a penalty (even though I paid in full). Most self-employed people I talked to around that time told me they don’t pay quarterly and just pay the penalty.
In my experience the penalty is 0.5% on the total, not per month. So it makes no sense to pay quarterly.
My wife got laid off last year and evidently checked a box that said I was dead when filling out the paperwork for her severance so we owe like 10K+.
According to TurboTax, there’s no penalty? Do they assess it after you pay and sent you a notice after? Guess ill find out and let y’all know.
In my experience the penalty is 0.5% on the total, not per month. So it makes no sense to pay quarterly.
That shouldn't be the case. See below:
That shouldn't be the case. See below:
Strange. I just pay whatever the tax guy says to pay and it's always been basically nothing so never bothered doing quarterlies. Pretty sure I didn't pay a penalty for 5+ years until last year was the first time it even came up.
This thread initially started referring to quarterly estimates, which apply to self employed people that don’t have taxes withheld from a paycheck. The link right below also refers to fail to pay taxes and fail to file a return, which could apply to both employees and self employed. Confusing a bit. Those who had an employer that withheld taxes but end up owing at year end (like the severance example) likely would not be responsible for penalty for not filing quarterly estimates.
I haven’t seen anything to make me believe that as someone self employed filing estimated returns quarterly or monthly is not the way to go.
