• withholding error, will owe $2000, what should I do ?

    From JGE@21:1/5 to All on Tue Oct 5 15:52:38 2021
    Thanks to error by my annuity provider, they did not implemented a requested increase to my withholding. As a result, when I file my return this spring, instead of slipping in just under the $1000 threshold for owing no penalty, I will owe about $2000.
    This was the last of my 2021 quarterly payments from this annuity, so no chance to withhold the amount going forward.

    Is the IRS likely to do anything but charge me interest ? (FWIW, the reason my taxable income was so much higher is that I decided to sell a bunch of stock, hence long-term capital gains).

    What is my best course of action now ? Should I make a $2000 estimated-tax payment now ? I'll still owe interest (if I don't file Scedhule AI) because I missed the first two estimated-tax deadlines, as well as the third. But presumably it'll be a
    bit less interest, and perhaps more importantly, I imagine it'll be less likely to raise eyebrows at the IRS than if I wait until I file my return.

    Thanks for any advice.

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  • From Bob Sandler@21:1/5 to All on Tue Oct 5 16:37:41 2021
    Thanks to error by my annuity provider, they did not
    implemented a requested increase to my withholding. As a
    result, when I file my return this spring, instead of
    slipping in just under the $1000 threshold for owing no
    penalty, I will owe about $2000. This was the last of my
    2021 quarterly payments from this annuity, so no chance to
    withhold the amount going forward.

    Is the IRS likely to do anything but charge me interest ?
    (FWIW, the reason my taxable income was so much higher is
    that I decided to sell a bunch of stock, hence long-term
    capital gains).

    What is my best course of action now ? Should I make a
    $2000 estimated-tax payment now ? I'll still owe interest
    (if I don't file Scedhule AI) because I missed the first two
    estimated-tax deadlines, as well as the third. But
    presumably it'll be a bit less interest, and perhaps more
    importantly, I imagine it'll be less likely to raise
    eyebrows at the IRS than if I wait until I file my return.

    Do you have any other sources of income where tax is
    withheld or can be withheld, such as a job, IRA withdrawals,
    etc.? You could have additional tax withheld from other
    income to make up for the missed withholding on the annuity.
    (I wouldn't mess with Social Security or pensions, though. I
    wouldn't be confident that you could change the withholding,
    then change it back, without running into problems.)

    If you can't adjust other withholding, make the estimated
    tax payment now. As you said, that will at least minimize
    any penalty or interest. Schedule AI is a pain in the neck,
    but it might save you a few bucks, or even eliminate the
    penalty. You could give it a try when you prepare your tax
    return.

    Don't stress about the IRS giving you a hard time. They
    aren't going to come after you about a $2,000 payment due,
    and owing $2,000 with your return is not going to "raise
    eyebrows" or trigger an audit. You might have an
    underpayment penalty on your tax return, but it will
    probably be small. You'll probably never hear from the IRS
    about it. At worst you'll get a bill for a small amount of
    penalty or interest. Pay the bill and that will be the end
    of it.

    Bob Sandler

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    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
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  • From JGE@21:1/5 to All on Wed Oct 6 10:54:36 2021
    Do you have any other sources of income where tax is
    withheld or can be withheld ...

    No.

    If you can't adjust other withholding, make the estimated
    tax payment now.

    Ok.

    Don't stress about the IRS giving you a hard time. They
    aren't going to come after you about a $2,000 payment due,
    and owing $2,000 with your return is not going to "raise
    eyebrows" or trigger an audit.

    Thanks, that was what I was worried about. I'm now dealing with my third erroneous CP2000 - no fun.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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