Xtra Estimated Tax Payment

[Hoosier]

Got a client that is having a good year with his business. Made estimated tax payments for 1st, 2nd and 3rd Quarters and plan to make a 4th Quarter estimate as well. Reviewing the estimates, I believe the first three quarters should have been higher amounts. Is it permissible to submit a 'second' third quarter estimated tax payment to help close the gap? Will the IRS accept two or more vouchers for the same quarter and does this create any reporting problems? Are there any other pros and cons to consider with this method of making some additional payment? The only other option that I know of is to beef up the 4th Quarter to cover the underpaid estimated taxes for the first three quarters plus the amount of tax for the fourth quarter. Thanks.

[Roland Slugg]

Is it permissible to submit a 'second' third quarter estimated tax payment to help close the gap?

Yes. See the "Tip" near the top of page 3 of the 1040-ES instructions. You can use any Voucher number, because the IRS credits estimate payments according to the date they are paid, not the voucher number printed on the form. Nevertheless, if it were me, I'd use a second Voucher #4, since we are now in the 4th payment period.

If your client makes a supplemental payment, be sure to take credit for it on his 2015 return. This sounds obvious, but you may have to work a little to make sure your tax prep software handles it properly. The extra payment needs to get included in the line for estimated tax payments, of course, but it also needs to transfer to F-2210 in order to reduce the underpayment penalty. Watch this carefully to make sure it does. The tax prep software I use requires a manual entry for such payments on one of the F-2210 screens.

Finally, does this taxpayer really need to make an additional estimate payment? As long as he pays in this year an amount equal to last year's actual tax (110% of last year's tax if he's above the income threshold requiring it), then he will be immune from a F-2210 penalty.

[JohnH]

The taxpayer could also sign up for EFTPS individual online payments and then he can submit estimated tax payments any time he wishes without even using a paper voucher.

[kathyc2]

Like Roland pointed out if estimated were based on paying enough estimated based on 2014 tax there will not be a penalty. If estimates 1-3 were not enough based on 2014, paying more now will not eliminate penalty, but will reduce it.

If client is having an unusually good year, consider having them having them pay the extra state tax on payment 4 and pay it in Dec to take advantage of Sch A deduction for 2015.