Taxpayer owes $8,000, has to make payments in 2019 for liability but cant pay the calculated quarterly payment. Where can I reduce the payments to meet her ability to pay

[IRonMaN · Accepted solution]

In the estimated tax worksheet, there is a box to enter the total estimates you want to have paid.  Enter an amount and click the box, and you are in business.

[jennifersue444]

Is the IRS ok with you setting the amount you want to pay each quarter?  If she wanted to only pay $100 a quarter due to a hardship could she do that or does she have to call IRS for approval to set how much she can pay a quarter?

[IRonMaN]

You can pay whatever you want.  The IRS really doesn't really care, but she will potentially pay a penalty depending on how short she is at the end of the year.  As noted by the Star Wars guy, does she have the ability to withhold additional dollars to avoid estimates?

[Just-Lisa-Now-]

Estimated payments are completely voluntary...getting the prior year balance paid of is far more important than sending in ES payments.

[itonewbie]

"Taxpayer owes $8,000, has to make payments in 2019 for liability but cant pay the calculated quarterly payment."

Tax liability for 2018 return and 2019 ES-tax are two different things.  If she has difficulty settling the balance from her 2018 return, she could consider applying to pay that by installments but interest and late payment penalty will continue to accrue.

If she is expected not to have sufficient withholdings to cover the minimum ES-tax payment required but does not make the quarterly payments on a timely basis, she would, unfortunately, be subject to ES-tax penalty.  She should aim to pay what she can, even if late, to mitigate that.  Another possibility is to use the annualization method to compute her ES-tax penalty if her income is not earned ratably through the year.

Given the amount she owes and inability to pay, it doesn't sound like the balance due is from personal income.  It may be a case of her not having enough withheld because she over-claimed her allowances on the W-4?  You may like to help her find the root cause and lessen the impact next year.

[IRonMaN]

I had two different clients over the years repeatedly tell me that they couldn't afford to pay estimates.  They couldn't come up with the cash to pay estimates but every year they could come up with the cash to pay the balance due at the end of the year ------ go figure.

[jennifersue444]

She never made much but settled a divorce and ended up getting his retirement in 2018.  Aside from the penalty she owes a lot and her normal income cant pay what proseries is calculating her payments each quarter in 2019.  If she told me she could only pay... lets say $100 a quarter each quarter...does the IRS allow you to just make payments of however much you want or does she have to have this payment schedule approved by the IRS?

[Marc-TaxMan]

for the current 2019 year, IRS/State will penalize if they are underpaid, but that's all.  And the failure to pay estimated quarterly are relatively cheap.  But failure to pay 2018 by 4/15/2019 is more expensive

[itonewbie]

I completely agree.  Not paying the 2018 balance due is much more expensive.

[rbynaker]

"I had two different clients over the years repeatedly tell me that they couldn't afford to pay estimates."

My favorite is the client that always had a sob story about how she could barely pay the balance due at the end of the year, there's just no way she could also pay estimates.  And, oh by the way, did she get any extra deductions for her brand new SUV?  And could we wait to meet for signatures until April 12th, cause she was going to be in France for two weeks prior to that.

[itonewbie]

Reminds me of all these stories in the media about people complaining that their refunds may be less than what they had expected because their refunds were frontloaded during the year...  Right, that's something to be upset about... having more money in your pocket than to have Uncle Sam hold onto that for safekeeping, really?

[Just-Lisa-Now-]

people think funny about money!

[itonewbie]

I also wish I could have my cake and eat it too.  And why not?  Here's why...
https://www.nytimes.com/2011/02/20/magazine/20FOB-onlanguage-t.html

[Just-Lisa-Now-]

cake?    I miss cake...my jeans don't miss it, but I sure do!!    :cake: :cake:

[itonewbie]

Jeff finished all the cupcakes already, so I surely can't have my cake and eat it.  Wonder if the cupcakes with lutefisk icing is good though.

[IRonMaN]

You can always try Spam frosting if you don't like lutefisk.

[qbteachmt]

You can Estimate what 2019 will look like and calculate the quarterly estimates. This isn't Fact: "Aside from the penalty she owes a lot and her normal income cant pay what proseries is calculating her payments each quarter in 2019"

It's using the reference data from the 2018 tax preparation. If 2019 will be significantly different, you help the client by figuring out their most likely requirement for 2019 estimates.