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Comment by jason_slack | Hacker News Reader

I just filed my taxes this morning.

I owe the government $4,600. I received an "underpayment penalty fee of $44" because I did not "pre-pay an estimated tax" each quarter. Something I have never done in the ~25 years I have been paying taxes.

Not only do they want the $4,600 by 4/15 they also want an estimated $1,200 "pre-payment" for 2019 by the same date or I will incur this same fee of $44 next year.Plus 3 more payments of $1,200 each quarter. So they want to hold my money without paying me interest. At least in my bank I earn more than the $44 penalty in interest each year.

This is bizarre. I surely didn't know about this nor did I read anything about new tax laws as I imagine most people don't.

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Not your fault. The Republican tax law of 2017 changed how your existing withholding instructions were interpreted, decreasing your withholding more than necessary in order to artificially inflate the perceived benefit of the new law. Now you’re paying for it.

The really annoying thing is that I agree it’s a good thing to have more accurate withholding and smaller refunds. They just screwed it up for political reasons.

All this could have been avoided if they just required employers to get updated W4s instead of defaulting to misinterpreting your existing instructions.

Recommend you submit a new W4 ASAP.

Strictly speaking, you're holding their money for a year without interest.

The estimated payments are not prepayments—they are payments that match what most W2 employees would pay every paycheck, but isn't the case for 1099 (or otherwise self-employed) individuals, since they don't have taxes withheld from their paychecks.

Actually, witholding started in WW II to help fund the war. Prior to that, people made quarterly payments. It was left in after the war, because government never lets an emergency go to waste.

That is fascinating! I wonder what kind of large scale effort it took to start having taxes withheld and sent to the government. So many small town employers that would need to comply and make a process to handle it....

That's fascinating!

Unfortunately it doesn't help the OP since he'd have to make quarterly payments regardless.

I get where you are coming from.

What if I have a baby in January or February? Then I would qualify for a deduction and then I am indeed overpaying them.

What if I lose my job? or get a job that is less money?

It's not their money unless I earn the money to pay them, IMHO.

It should go both ways.....why can't I ask them to estimate a refund then and give it to me in advance?

> It's not their money unless I earn the money to pay them, IMHO.

Of course—and in my understanding estimates account for this. If you earnings diverge such that you will not owe that money in the end, you don't have to pay it and won't face a penalty, as long as you've paid a certain percentage of your year-end tax liabilities.

And to be clear, I'm not arguing from principle. They should make it much easier and straightforward to pay and understand taxes regardless employment arrangement. However, in practice, they view estimated taxes (quarterly) or paycheck withholdings as required payments or they will levy penalties. :-)

I feel you. I'm not trying to argue with you at all :-)

I get both sides of the situation. It just seems the side of the tax payer doesn't matter.

For several years in grad school I had income that varied significantly in different parts of the year (I got a large scholarship check as a lump sum). So every year, I had to fill out some obnoxious, moderately complicated form detailing my month-by-month income and calculating the estimated tax that I needed to pay each quarter. Upshot: the tax system does allow for changing circumstances and won't penalize you for not foreseeing them in advance, but it does make your taxes a lot more complicated.

You can change your withholding at any time by filing a w 9 with your employer. Certainly for life events like a child, this is possible.

> why can't I ask them to estimate a refund then and give it to me in advance?

You sort of can, by adjusting your withholding.

true, I could with hold like Married, 9, lol.

But then if I did that and at year end didn't have enough taken I would still face a penalty.

It feels like taxpayers just have to take it.

And if you are due a refund they are holding yours, but good luck getting any interest on that!

Exactly. They want their money immediately or else penalties/interest however they wont front the money to those that routinely get refunds. They need the interest they earn to afford the refund perhaps.

Yep. We got hit with an enormous bill we didn't see coming either. The new tax law crushed us.

But strictly speaking, they don't see it as holding your money, they see it as your money is due when you earn it and if you are witholding "too much" from your paycheck then you are holding their money.

We have got to pass a law saying all lobbying must be done with full transparency- no secret meetings, etc. We have got to limit the access that megabuck gives to our politicians. It's getting insane.

That's weird because there used to be a safe harbor rule where you didn't owe the fine the first time it happened. So either you don't owe that $44 or something changed..

Perhaps you just didn't withhold enough on ordinary income (which requires overriding payroll defaults). There's probably no safe harbor for that.

I claim single 1 for everything as does my wife

Estimated tax has to be filed by anyone with non withheld income. This is readily available knowledge on the irs website. Its not your money once uncle Sam taxes it. It is the irs's money the moment you earn it. Out of courtesy, they loan it to you for a quarter but it is certainly not 'your money'. We shouldnt brag about not paying the same tax everyone else pays.

If this makes you mad, perhaps you'd be interested in lobbying for lower taxes

Not saying I don’t commiserate - but it kind of makes sense - you underpaid us during the course of the year by $4,600, assuming you make the same again next year, we need you to pay us quarterly to make up the estimated shortfall - if it turns out you overpaid we’ll true you up (via a refund)

But again, if I am a person who see's a refund each year, why doesn't the government give me a refund up front and trust me to pay it back if my circumstances change?

You see, they expect me to accommodate them, when it is convenient for them, but they would not accommodate the reverse because it doesn't accommodate them.

my guess is there response would be that if you see a refund each year you should adjust your withholding amount...

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