On Extension – Estimated Tax
Recommended manner in paying Form 1040 estimated tax
Estimated tax payments are due April 15th, June 15th, September 15th and January 15th.
- IRS has a payment voucher to accompany the taxpayer’s check Form 1040-ES (IRS web page)
- Payments can be made online here: http://www.irs.gov/Payments/Direct-Pay
- An EFTPS account to make and track payments can be done online here: https://www.eftps.gov/eftps/
- And other methods, including credit cards here https://www.irs.gov/payments/ (note that there is a stiff processing fee when using a credit card)
For many taxpayers a superior method is to make their timely April 15th payment on an extension Form 4868 rather than use Form 1040-ES (or its electronic equivalent). For example, a taxpayer who needs to pay $40,000 for 2018 estimated tax, would use this schedule:
- April 15, 2018, with Form 4868 $10,000
- June 15, 2018, with Form 1040-ES $10,000
- September 15, 2018, with Form 1040-ES $10,000
- January 15, 2019, with Form 1040-ES $10,000
If the taxpayer may owe some additional tax for 2017, an appropriate amount would be added to the April 15, 2018 Form 4868 payment.
When the taxpayer eventually timely files Form 1040, a “credit elect” election is made (on Form 1040, line 77) to roll the excess to the following year’s estimated tax.
What if the taxpayer already filed for an extension? Generally there is nothing preventing the taxpayer from filing an additional paper-filed extension, nor many types of electronic filed extensions.
When making a payment on or before the due date, the IRC §7502 “timely mailed = timely filed” rule says that the USPS postmark determines timeliness. If the due date is missed, then the postmark no longer applies and the date of receipt and processing by the IRS prevails and determines when late payment interest-penalty is assessed. IRS assesses interest-penalty for a month at a time, as of the 15th of the month.
Note that pursuant to Regs. §301.7502-1(c) and §301.7502-1(e) the “timely mailed = timely filed” rule generally also only applies when there is a legible USPS postmark on the envelope that is delivered to and received by the IRS. Otherwise certified mail receipts obtained by the taxpayer might be used. Since the mail can get lost, it is up to the taxpayer to obtain and keep certified mail or registered mail receipts. Do not use private postage meter postage to rely on for the mailing date see, Regs. §301.7502-1(c)(1)(iii)(B). While certain approved private carrier services by FedEx and UPS sometime may be used, I generally suggest only using specifically: USPS certified mail, see Regs. §301.7502-1(c)(2). Special rules for electronic filing are covered by Regs. §301.7502-1(d).
Note that for timely filings and timely payments the IRC §7503 rule and Reg. §301.7503-1 holds when last day performance of an act falls on Saturday, Sunday, or legal holiday the act shall be considered timely if it is performed on the next succeeding day which is not a Saturday, Sunday, or a legal holiday.
Note: for the definition of what constitutes “a month” see Regs. §301.6651-1(b).
See our page IRS Penalties – Late Filing & Late Payment for more related information.
Late payments / late filings
Caution: pursuant to IRC §6511(b) payments of tax that go unclaimed or unused for two or three years can be forfeited to the U.S. Treasury as a penalty for non-filing or late filing. In other words, absent any extenuating circumstances, generally no credit elect and no refund will be allowed after two or three years.
A rare and little known procedure is outlined in Rev. Proc. 2005-18 and IRC §6603 which says that in lieu of payments of tax, deposits can be made to suspend the running of interest on potential underpayments, etc. This procedure is generally used by and maybe even limited to taxpayers who under IRS examination of disputed items.
Caution: using Form 4868 as outlined above generally only works for a period of weeks preceding April 16th. But sometimes taxpayers need to pay prior year taxes even later, after April 15th. A way to do this is to late-file a 4th quarter 1040-ES for the prior year (which is normally due January 15th)