Home Forums Hunting & Shooting Hunter's Campfire Tax question. Educated guesses welcome

My wife and I did not pay into federal income taxes on our retirement pay. That would be Social Security and my police and National Guard pensions. I did pay into the fed's for my part time driving job. We both got letters today saying we owed an additional $146 in taxes but it looks like 100% penalty. This is for the 2023 taxes. We have already paid the 2023 taxes with a check for around $5000.

Are the Fed's penalizing folks for not paying in during the year on retirement pensions ?? I guess those extra 70,000 new IRS agents need to stay busy.

kwg

Is it an underpayment penalty?

My mom lives off my dad’s teacher pension. But they withhold federal taxes so she’s never had a problem. If your pensions aren’t withholding, then you may have to make quarterly tax payments (i.e. $1,250 per quarter). If you don’t then the IRS might charge you penalties & interest for not having made those payments.

Click here to read a blog post!

If you don't have enough withholding to meet IRS thresholds (less than $1,000 tax due,90% current year tax or 100% prior year tax), then you are required to pay estimated tax to meet those thresholds. I suspect the additional "tax" is actually penalty and interest for not paying the est. tax. It has nothing to do with additional IRS employees - nothing new.

It appears so. I just had a conversation with my tax guy. He is in agreement with me about the 70,000 new tax agents. It appears we have been getting by for years without paying in during the year and just paying at the end of the year. He says there is a law that if you pay in more than $1000 at the end of a year, you are not having enough taken out. You either need to change your deductions or pay in quarterly.

It hasn't been enforced because there wasn't enough agents to scrutinize the tax returns. One of those new hires just caught up with us. My wife and I each owe $146.59 since we filed jointly. So much for only going after the wealthy 1%. I consider myself (and wife) the bottom of the middleclass income wise.

So, they squeezed an extra $300 out of us in addition to the $4800 check we wrote in March.

I am not a happy camper.

kwg

Don't know why you weren't assessed underpmt penalty before if you, in fact, had underpaid. It's a simple calculation that the IRS does, probably all by machine, rather than by an agent. Your tax guy should have known this and let you know. I also don't understand why you would each owe that amount, as a joint return is treated as one entity with one tax amount.

He told us about the law change but since we had not yet been hit with a penalty I wasn't ready to make any changes. The fed's got their money in one check. My attitude is still f&*k them pieces of $hit.

kwg

I agree with the double amount but the tax guy was adamant that we each owed the $146.59.

kwg

If you underpay you usually have to pay penalty and interest. I have had to pay a few times.

I just sent them $4700 today. This was due to realized capital gains from the sell of stock last year. Am I going to get penalized as well?

When did you sell the stock ?? My bet is you will owe interest from the day you sold the stock. If it was last week your bill should be small. If it was from several months ago I'm going to bet it will be around $146.59. If you filed jointly with your wife they will hit her up as well.

kwg

Maybe, maybe not. Depends on the timing of the sale. If it was last quarter you are good. First quarter maybe a little more of an issue.

It also depends on your total tax bill. My income comes from multiple sources and can vary by a wide margin from year to year. Basically if I make my estimated quarterly payments on time based on the previous year’s income or I pay 90% of my total taxes during the year for that year I am good in terms of penalties and interest.

If you are paying a CPA to do your taxes, he should pay the penalty. It is the accountants obligation to prepare your taxes correctly, that includes calculating estimates.

The CPA firm that prepares my taxes made a mistake on my tax return several years ago. The IRS caught it, I was responsible for the additional tax liability, however the accounting firm paid all penalties and interest (edited to interest in lieu of taxes)

HAPPY FRICKIN' TAX DAY BOYS !!!

We paid $50k in taxes - getting $6.5k back

This.

You have the choice of paying estimated taxes quarterly of paying the penalty at the time of filing.

I am in a similar situation with non-W2 income, & the penalty isn't enough to make me give the fuggers the money during the year.

MM

They've charged underpayment penalties forever if you don't meet their rules. Not paying anything during the year on significant inome sources breaks the rules quite often.
I don't know all the rules today, but paying in at least what i owed in the prior year kept me out of penalty for years. Their penalties are no fun, so it's worth it to learn the rules so you can avoid the penalties.