Tax day, take two

In honor of freelance tax day, here’s one more Q&A with my friend the CPA:

Me: Say, Friend the CPA, I’ve been meaning to ask you this last question for a while. On the rare instance that I forget to make one of my freelance quarterly tax payments, what will Uncle Sam do to me? I mean, not that I would ever forget to pay my taxes, but I’ve heard of (ahem) people doing this.

CPA pal: If you don’t have an employer who takes taxes out of your paycheck, the IRS requires you pay your estimated taxes quarterly. In other words, “forgetting” isn’t an option. If you fail to pay your estimated taxes one particular quarter, all-knowing Uncle Sam will swiftly charge you interest on any late payments (though he likes to use the term “penalty”).

Happily, if your income during a particular quarter is nil, you don’t have to make an estimated tax payment for that quarter. However, you would have to fill out a form to prove that you had a dip in income and attach said form to your tax return. Otherwise, the IRS will simply go ahead and charge you the interest/penalty anyway. I do these forms for clients from time to time. But be warned: This is one nasty-ass form, and without impeccable financial records, it’s tough to fill out. Capiche?

Me: Thank you, Friend the CPA. You are wise beyond your years.

8 comments January 16th, 2007