Posted on 12/03/2023 6:39:36 AM PST by Libloather
The IRS penalty for underpayment of estimated taxes is up sharply this year, with self-employed and freelance workers at the biggest risk of getting hit.
The penalty, calculated quarterly based on the Federal Reserve's benchmark rate, hit 8 percent on October 1, up from just 3 percent in early 2021, when Fed rates were near zero.
The penalty rate applies to shortfalls in estimated taxes, which self-employed workers pay the IRS quarterly based on their earnings for the period.
Employees who have income taxes deducted from their paychecks generally do not have to pay estimated taxes, and are unlikely to be impacted by the new fine.
But for the self-employed, the new higher fine is yet another consequence of the Fed's aggressive rate hikes, which the central bank has deployed to battle inflation.
The IRS calculates the underpayment penalty by taking the Fed's benchmark rate for the quarter and adding 3 percent.
According to the Wall Street Journal, the IRS assessed more than $1.8 billion in penalties for underpaying estimated taxes on nearly 12.2 million individual returns in fiscal year 2022.
The IRS expects workers to pay taxes as they go, whether through paycheck withholding for employees or quarterly payments for self-employed workers.
Those rules apply to the period in question — meaning that if you underpay estimated taxes for a single quarter, you could still be penalized even if you pay more than is owed for the entire year.
According to the IRS, you can avoid an underpayment penalty fine if your filed tax return shows you owe less than $1,000.
As well, anyone who pays at least 90 percent of what they owe for the tax year in question, or 100 percent of what they owed the prior year, is granted safe harbor from the fines.
(Excerpt) Read more at dailymail.co.uk ...
All kidding aside, I always thought that only Congress, more specifically the House, makes all the decisions regarding taxes. Not the bureaucrats.
Both parties claim to be the party of the working man and woman. Kind of hard to believe that when they take away the ability for folks to deduct property taxes and mortgage interest on your 1040, if you’re taking the standard deduction.
So, I guess only those that have numerous deductions, for various things, and the rich get to use those deductions while the middle/working class folks get screwed…..as usual.
And it’s been reported that the IRS is going to increase audits on the middle class. Praying in those that can’t afford a $1000/hr tax attorney. What the hell do they think they’re going to get? I guess it’s easier to get an additional $500-1000 from someone that can’t defend themselves rather than the millionaire that shows up with a law firm.
https://www.breitbart.com/politics/2023/01/09/irs-audits-working-class-the-rich/
And republicans in congress do nothing. But everyone will keep voting for them
Was there a Congressional vote on this?
Naaaah.
When the SCOTUS reverses the Chevron deference this session, there will be a huge reduction in the powers of the administrative state.
After about 20 years, I’m still waiting for the IRS to identify the law that requires most people to file a return.
Should that be….IF SCOTUS reverses the deference?
Have you ever watched, Freedom to Fascism by Anthony Russo?
If not and if what he/they say is correct, it will make your blood boil.
Example….guy shows up to an audit and secretly records it…IRS agent asked in court if he took any note - answers NO….recording shows agent taking notes, thus committing perjury…..judge doesn’t allow the video in as evidence.
Wasn’t much fun, was it?
No, broke us and we had to build something else from scratch again.
And the check is in the mail.......
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