What Is the Penalty for Paying Federal Estimated Taxes Late?

What Is the Penalty for Paying Federal Estimated Taxes Late?
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Most workers have their federal taxes withheld from their paychecks by employers, so they never have to worry about making estimated tax payments. If you are self-employed, however, you must make estimated tax payments to the Internal Revenue Service every quarter unless you can prove your yearly liability is less than $1,000. If you don't pay estimated taxes, you face penalties.

When Your Payment is Due

As a self-employed individual, you must pay your estimated tax payments on a quarterly basis. These payments are due on the 15th of April, June, September and January of the following year. When creating your quarterly plan with the IRS, you must complete IRS Form 2210. This form helps you calculate your quarterly estimated payments and ensures they are at least 90 percent equal to your liability for the filing year.

Five Percent Penalty

If you pay your estimated tax payment late, or pay less than the minimum amount due, you face a penalty equal to 5 percent per year of the estimated payment, as of 2012. This annual 5 percent rate is calculated from the day it was due until the payment is made. Therefore, the more days that pass without payment, the higher your penalty. For instance, if your quarterly payment was $500 and you are one month late, you would owe about $2 on your late quarterly payment. If you were two months late, the penalty would be closer to $4.


There are instances when not paying your estimated taxes can benefit you. Though you are encountering a 5 percent penalty, that penalty is low in comparison to the interest rates associated with short-term loans. So delaying your quarterly payment for a month to come up with some cash can be more cost effective than taking out a short-term loan for the same amount, or taking an advance on your line of credit, because the interest you pay on the loan might be greater than 5 percent.

Special Circumstances

Your payment must be postmarked by the 15th -- not received by the 15th. If the 15th falls on a holiday or weekend, it must be postmarked by the next business day.