Postponing Tax Day

Discussion in 'Smokers Lounge' started by MellowDood, Oct 15, 2010.

  1. MellowDood

    MellowDood weed eater

    Although I work in an office, on paper I am an "independent contractor" so my taxes are not withheld and I'm fully responsible for paying the IRS. I'm supposed to make quarterly payments, but the penalty for paying the entire bill all at once at the end of the year is minimal. I'll cough up another $100 at the end of the year for the security of an emergency fund in case I lose my job. I know I should have an emergency fund, but as of today my savings would only last a month or two.

    Now that my tax bill is coming due in a few months I'm wondering if I could postpone payment even longer. Can I file my 1040 with "I owe you fuckers $XX,XXX" and simply not include the check? Is there a procedure for paying down what I owe for 2010 over time later in 2011? If so, do I have to qualify somehow? I'm not trying to avoid paying. I just don't want to write a huge check (like last year) and then see my bank account drop to virtually nothing. I'll pay what I owe, eventually, and even pay the interest penalty.

    My main concern is losing my job and not finding a new one quickly enough to keep up with bills. If I hold the taxes I owe, then at least I would have a cushion in case it takes more than a couple months to land a new job. More likely I would end up moving because the local job market blows, and moving can be expensive! I'm absolutely not going to use credit cards. I've done that before, and now that I paid off every last dime I'll never do it again. I'd rather owe the IRS than the bank.

    Any advice is much appreciated! :smoke2:
     
  2. ResinRubber

    ResinRubber Civilly disobedient/Mod

    On April 15 file a Form 4868 for an automatic filing extension. This will buy you an extra 6 months. There will be interest owed on any unpaid tax but it should be fairly nominal.


    I've done this each and every year for the last 12 or so since I always owe for 1099 income. It's cheaper just to do quarterly payments but it galls me to give the gubbermint my $$ before I absolutely have to.
     
  3. MellowDood

    MellowDood weed eater

    Thanks, Resin! So the final payment (when paying quarterly) is due January 15, 2011, but filing is not due until April 15, 2011. If I file Form 4868 by April 15 does that give me until October 15, 2011, to pay my 2010 bill? If I file early, say February 1, do I still have until October 15 or would it be 6 months from the file date, closer to July 1, 2011? My taxes are very simple so I prefer filing early to get it out of the way, but if waiting until April gives me a few more months I'll wait.
     
  4. MellowDood

    MellowDood weed eater

    I read Form 4868, but I'm a little confused about the penalty. It says it is 1% of unpaid tax and is charged each month with a maximum penalty of 25%. For example, if I do not pay $10,000 until next October will they charge me $100 per month PLUS interest? For 6 months April-October is that $600? The last few years when I filed early and paid everything in January it added about $100, which I guess was only interest. Adding the penalty makes the punishment much more severe.


    Resin, is your 1099 income only a small portion of your overall income? I can see how the interest+penalty is fairly insignificant if that's the case, but it seems high to me considering 100% of my income is 1099. Either that or I'm not calculating the penalty correctly.
     
  5. ResinRubber

    ResinRubber Civilly disobedient/Mod

    I'm gonna punt and say pay a guy a couple hundred to set it up for you. But here's what I do. I know it isn't correct but it's worked so far. When filing an extension you're supposed to pay what you estimate you owe. My guy always estimates 0. Then on August 15 I file my return and write a check for whatever the real amount is. Some years it hurts a lot, other years it doesn't hurt as much. Roughly 1/2 or more of my income is 1099. Some years its 80%.


    The extension is from April 15 to August 15 of the same year no matter when you filed.


    ....that's all know on the subject. Good luck!
     
  6. MellowDood

    MellowDood weed eater

    Thanks. On years when "it hurt a lot" do you remember if the penalty was as much or more than the interest? Or did your guy just give you the total?
     
  7. MellowDood

    MellowDood weed eater

    After reading some more information about this I realized that I misread the form. The late payment penalty is 0.5% per month not 1% per month. It looks like when paying nothing until September 30, 2011, the penalty is 3% plus interest of 4.5%. That's pretty hefty! :icon_eek:


    Resin, thanks for pointing me to Form 4868. At least now I know that I can do this if necessary. Hopefully I won't have to wait until September to pay so the penalty won't be quite as high.
     
  8. ResinRubber

    ResinRubber Civilly disobedient/Mod

    Sounds about right. Look at it this way, for every $1000 you owe it costs you $30 bucks to keep your money in your pocket for 6 months. That's a very inexpensive loan.
     

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