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Originally Posted by Xist
Today I received a letter from the I.R.S. stating they are fining contractors for not estimating quarterly taxes now.
I would have appreciated them informing me before they started fining me.
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That isn't new - I got a similar notice almost 20 years ago. A lot of people are surprised by that the first time they work on a 1099. IRS says:
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Who Must Pay Estimated Tax
Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.
Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.
You may have to pay estimated tax for the current year if your tax was more than zero in the prior year. See the worksheet in Form 1040-ES, Estimated Tax for Individuals for more details on who must pay estimated tax.
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The IRS will also fine people working a W2 job for under withholding. You have to withhold at least 90% of owed taxes or pay a fine. I found that out about that about 10 years ago when we found out the W4 form for employee withholding didn't work for dual income households. Even claiming zero dependents (not even ourselves) the IRS didn't withhold enough from our checks. We had to manual calculate how much extra to withhold each check.
I got hit with a fine for underwithholding again this year because I switched my 401K from traditional to Roth so I had to pay income taxes on an extra $20K - and forgot to update my W4 to withhold even more.