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Find free help in calculating estimated-tax penalties

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Estimated-tax penalties are equivalent to the interest you'd pay on tax underpayments. You must figure out the underpayment for each time period and the number of days in that period. Then, apply the appropriate interest factor. (The IRS interest rate for this year's fourth quarter is 7 percent.)

 

Our advice: These numbers can be confusing, and you'll tear your hair out going through the calculations on Form 2210 (Underpayment of Estimated Tax by Individuals, Estates and Trusts). So, why bother? Have the IRS do the calculations for you. If you don't fill out the form, you don't have to do anything until the IRS sends you the bill. But if the interest penalty is substantial, consider running the IRS numbers by your tax adviser to check them out.

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