See how to upload tax source documents and access your tax return in Onvio via short video...
Onvio "how to" videosAvoiding Late Payment Penalties
No one likes to pay penalties or interest! It’s possible even if you have a tax refund to still be subject to penalties from both the Internal Revenue Service (IRS) and New York State. Let’s go over why these penalties happen and how to avoid them in the future.
Both the IRS and New York State expect all income taxes to be paid in by the last day for estimated tax payments - January 15th. Forgive me if I get a little technical here. If you do owe tax with your federal income tax return, generally, you will avoid an Underpayment of Estimated Tax Penalty if you owe less than $1,000 in tax with your tax return, or paid at least 100 percent of last year’s tax liability, or paid in at least 90 percent of this year’s tax liability. Note that if your income has been higher than $150,000 you will need to pay in at least 110 percent of last year’s tax liability to be certain to avoid the underpayment penalty.
If you file and pay your income taxes by April 15th, the good news is you do not have much more to worry about. If you owed taxes, there may be a reason. Many times employees with multiple jobs will find that not enough income tax was withheld from their paychecks. The reason is that the Form W-4 you filled out for each job assumes that particular job will be the only wages you earn for the year. You will need to adjust your W-4s to have more income tax withheld from your paychecks or you should make estimated tax payments instead. Business owners should pay estimated taxes equal to last year’s tax liability in four equal installments due on April 15, June 15, September 15 and January 15. If your business income is seasonal, your tax professional can help you determine your estimated payments and also fill out a worksheet with your tax return to avoid the underpayment penalty.
What if you filed an Extension of Time to File form by April 15th with both the federal and state governments? You will not avoid penalties because that 6-month extension is not an extension of time to pay income taxes. “But, but” you say, “I don’t know what I owe!” You can probably guess that there is no empathy coming your way from the government.
For any income tax owed when you do file your tax return by October 15th, you will also have to pay a late payment penalty and late payment interest. Furthermore, a punitive late filing penalty is owed if you file the federal income tax return after the extended due date. New York State is a bit “tricky” here if you file your extended return with tax owed after 60 days beyond April 15th (June 14) -- in effect, it is as if you did not file a 6-month extension of time to file at all! On the otherhand, if you have a tax refund coming to you then you do not have to worry. None of these penalties apply.
Everyone loves a tax refund and hates it when they owe taxes with their tax return. Consult with your tax advisor if your income has changed substantially. Be aware of tax changes that can be anticipated for the coming year. The Child Tax Credit ends when your child turns 17. Education credits will end with college graduation. If your child gets a fulltime job and moves out by June 30th, they are probably no longer your dependent. That’s good for you, but bad for your taxes!