I mailed a check to the IRS today LMAO

[\GoBillsInDallas/]

Last year was a very good year for me (financially). In addition to my regular job, I did some consulting for two developers on two large, high-profile projects which turned out quite nicely. And the developers paid me some good money as a "contractor".

 

As you know, you are supposed to make quarterly estimated tax payments if you aren't withholding enough. But I was so busy last year, I didn't have the chance. So, on April 15th, I sent a check to the IRS for $24,000 with my income tax form, since I didn't withhold enough during the year.

 

So, I get a letter from the IRS in July, saying that I did not pay the proper estimated tax, and now I need to pay a "penalty".

 

So, what is my "penalty" for not paying $24,000 in estimated taxes? $192. I mean, like, seriously?

[Koko78]

Gotta love bureaucracy. Even if they're wrong about the 'penalty', it will cost more to fight it than to just pay the money.

[DC Tom]

Last year was a very good year for me (financially). In addition to my regular job, I did some consulting for two developers on two large, high-profile projects which turned out quite nicely. And the developers paid me some good money as a "contractor".

 

As you know, you are supposed to make quarterly estimated tax payments if you aren't withholding enough. But I was so busy last year, I didn't have the chance. So, on April 15th, I sent a check to the IRS for $24,000 with my income tax form, since I didn't withhold enough during the year.

 

So, I get a letter from the IRS in July, saying that I did not pay the proper estimated tax, and now I need to pay a "penalty".

 

So, what is my "penalty" for not paying $24,000 in estimated taxes? $192. I mean, like, seriously?

 

I've paid larger penalties on half as much. That sounds like a mistake.

 

Or, as the IRS will say: that sounds you made a mistake.

[/dev/null]

Gotta love bureaucracy. Even if they're wrong about the 'penalty', it will cost more to fight it than to just pay the money.

 

A friend of mine a few years ago had a little dispute with either city or state (I forget which) of an unpaid account balance of less than the price of a stamp. what happened was between the time he mailed the check to pay some bill and the bureaucrat processed the payment, interest had accrued.

 

So they sent him a letter asking for payment of the 20 or 30 cents

Then another letter

And another

And another

And some more letters

 

They probably spent 10x the amount due on postage to collect a trivial debt before he finally gave up and wrote a check for less than the price of the stamp to mail it.

[dayman]

IRS usually won't destroy you if you pay. Is it not that simple? Hell...I've heard someone explain to me (despite my insistence I did not care and was not interested in hearing) about how he always pays his taxes at least a year late and somehow with some investing scheme he makes money given that the small or nonexistent consequence for doing this from the IRS (in his mind) mandates he do so as a "sophisticated" money manager who knows an incentive when he see one.

[DC Tom]

A friend of mine a few years ago had a little dispute with either city or state (I forget which) of an unpaid account balance of less than the price of a stamp. what happened was between the time he mailed the check to pay some bill and the bureaucrat processed the payment, interest had accrued.

 

So they sent him a letter asking for payment of the 20 or 30 cents

Then another letter

And another

And another

And some more letters

 

They probably spent 10x the amount due on postage to collect a trivial debt before he finally gave up and wrote a check for less than the price of the stamp to mail it.

 

We have that going on right now. We got a bill for 30 cents. Sent in a check for 60 cents. Then got a bill for 17 cents (30 paid, plus 30 credited, plus 47 cents interest, somehow.)

[Nanker]

The real cost to "mail a letter" is far more than the cost of the postage.

Here are some of the hidden costs:

Sheet of paper

Envelope

Ink/toner

Electricity to power the equipment

Depreciation on capital costs of equipment required

Depreciation on capital costs of office furniture

Apportionment of rent, heat, lights, electric, gas for office space or Depreciation on building and equipment

Labor to type/print the letter

Labor to fold the letter

Labor to insert the letter into the envelope

Labor to seal the envelope

Labor to affix the stamp or meter the indicia on the envelope

Labor to address the envelope - either directly or by printing and affixing a label

Labor to drop the letter in the USPS mail stream

Labor to follow up on the communication

HR Benefits, SSI, Disability, Workmen's Comp, etc. on the labor

 

Wash, rinse, repeat if a follow up letter has to be sent.

 

I recall seing an article quite some time ago that said the "real cost" of mailing a single letter was over $7.00.

[keepthefaith]

The penalty might be correct. There are rules regarding making estimated tax payments for non W2 income and any tax accountant should understand the rules and could review it for you. If you will have similar income this year, making the correct estimated payments is a wise thing to do.

[Koko78]

The real cost to "mail a letter" is far more than the cost of the postage.

Here are some of the hidden costs:

Sheet of paper

Envelope

Ink/toner

Electricity to power the equipment

Depreciation on capital costs of equipment required

Depreciation on capital costs of office furniture

Apportionment of rent, heat, lights, electric, gas for office space or Depreciation on building and equipment

Labor to type/print the letter

Labor to fold the letter

Labor to insert the letter into the envelope

Labor to seal the envelope

Labor to affix the stamp or meter the indicia on the envelope

Labor to address the envelope - either directly or by printing and affixing a label

Labor to drop the letter in the USPS mail stream

Labor to follow up on the communication

HR Benefits, SSI, Disability, Workmen's Comp, etc. on the labor

 

Wash, rinse, repeat if a follow up letter has to be sent.

 

I recall seing an article quite some time ago that said the "real cost" of mailing a single letter was over $7.00.

 

You didn't mail that letter, someone else made it happen...

[ICanSleepWhenI'mDead]

The penalty might be correct. There are rules regarding making estimated tax payments for non W2 income and any tax accountant should understand the rules and could review it for you. If you will have similar income this year, making the correct estimated payments is a wise thing to do.

If you want to take the time to understand if the penalty is correct, read about the "safe harbor" provisions based on your prior year's adjusted gross income. It's my undestanding that it basically works like this:

 

No matter how much you made in 2011, and even if you made millions more in 2012 than in 2011, if your combination of 2012 withholding and any estimated tax payments made in 2012 equals at least 110% of the total income taxes you paid for 2011, then you owe absolutely NO penalty or interest at all [assuming that you (1) timely paid all of the remaining tax owed by April 15, 2013, and (2) your withholding and any estimated tax payments were evenly spread out each quarter].

 

More details here:

 

http://www.irs.gov/p...040es--2012.pdf

 

If you have another banner consulting income year in 2013, your "safe harbor" will have a much larger base (because it will be based on the very good financial year you had in 2012). So failure to pay estimated taxes in 2013 would have greater consequences.

Edited July 30, 2013 by ICanSleepWhenI'mDead