Your Questions, Answered

  • Taxpayers with significant income outside of W-2 wages (e.g., from pass-through businesses or investments) are required to make quarterly payments. These payments are due on:

    •        1st Quarter: April 15 (covers January 1–March 31)

    •        2nd Quarter: June 15 (covers April 1–May 31)

    •        3rd Quarter: September 15 (covers June 1–August 31)

    •        4th Quarter: January 15 of the following year (covers September 1–December 31)

  • The most common penalties taxpayers face are failure to file, failure to pay, and failure to make timely estimated tax payments.

  • To avoid underpayment penalties, taxpayers must meet one of the following thresholds:

    •        Pay 90% of the current year’s tax liability, or

    •        Pay 100% of the prior year’s tax liability (110% if prior year AGI exceeds $150,000).

    While meeting these thresholds avoids underpayment penalties, any remaining tax due must be paid by April 15 to avoid further penalties and interest.

  • File your tax return by tax day (April 15th) or file an extension to allow for additional time to file your tax return. The extension deadline is typically till October 15th. If these dates fall on a weekend or a holiday, the deadline is extended to the next business day. The state tax returns deadline vary state to state.

  • Taxpayers can file for an automatic extension, giving them until October 15 to submit their tax return.

    However, this extension only applies to filing the return—it does not delay the requirement to pay any balances owed.

    To avoid penalties when filing an extension, taxpayers should estimate their total tax liability and ensure the amount already paid (through withholdings or estimated payments) is sufficient to cover their balance due by April 15.

    1. Failure-to-Pay Penalty – 0.5% of the unpaid taxes for each month (or part of a month) the payment is late, up to 25%. Interest accrues on unpaid amounts as well.

    2. Failure-to-File Penalty – 5% of unpaid taxes for each month (or part of a month) the return is late, up to 25%. If both penalties apply, the failure-to-file penalty is reduced by the failure-to-pay penalty.

    3. Underpayment of Estimated Tax Penalty – Charged if you do not pay enough tax throughout the year through withholding or quarterly estimated payments. The IRS calculates this penalty based on the amount of the underpayment, the period it remained unpaid, and a fluctuating interest rate (updated quarterly).