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Old 03-01-2009, 09:19 PM
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Question concnerning estimated tax penalty

I am a graduate student that receives a yearly stipend of approximately $28,000. In previous years, I have made my estimated tax payments on time with no problem. Last year, I owed the government about $240 after estimated taxes. This year, I made my first-quarter estimated tax on time. However, I did not make my next two estimated tax payments. In the beginning of January, I made a single payment to make up for the previous two missed payments as well as my last-quarter estimated tax installment. After adding all of this up, I still owe $335. I should also mention that I received a raise in the middle of 2008 (not sure if this matters). Is it likely that I will get hit with a penalty? Thanks

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Old 03-01-2009, 10:42 PM
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Since you have missed the 2 required quarterly estimated tax payments you could be subjected to both the underpayment penalty and the interest on the underpayment. But, you may have avoided this penalty if you:

1) owe less than $1,000 in tax after subtracting your withholdings and credits.

2) paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

There are 2 additional circumstances that the IRS will accept and waive the penalties and interest if the following situations apply to you as follows:

1) 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.

2) 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.

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Ask TaxGuru Please refer to the legal disclaimer.

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