IRS fee for large refund?

[aka619er]

A buddy of mine says he just got a letter from the IRS saying that due to his large refund ($4000) he is getting a penalty on his taxes and has to pay a $195 fine.

I Googled it and see no mention of such fines. He claimed his CPA warned him about it a month ago when he did his. I'm finishing mine now and getting more than him so I guess I should be expecting a fine as well?

 

[napanutt]

A buddy of mine says he just got a letter from the IRS saying that due to his large refund ($4000) he is getting a penalty on his taxes and has to pay a $195 fine.

I Googled it and see no mention of such fines. He claimed his CPA warned him about it a month ago when he did his. I'm finishing mine now and getting more than him so I guess I should be expecting a fine as well?

I’ve had to pay that penalty before too.

 

[joecfd1]

Refund? What's that???

 

[Andy B.]

Yeah haven't had one on years

 

[El Rojo]

A buddy of mine says he just got a letter from the IRS saying that due to his large refund ($4000) he is getting a penalty on his taxes and has to pay a $195 fine.

I Googled it and see no mention of such fines. He claimed his CPA warned him about it a month ago when he did his. I'm finishing mine now and getting more than him so I guess I should be expecting a fine as well?

I get back like 6k fed and have never had to pay a fine….

 

[Ziggy]

What a crock of shit. Tax/fee you on money that is yours??

 

[fishing fool]

@shintoooo what do you have to say about this???

 

[boatpi]

I never heard of that?

 

[Done-it-again]

Used to get money back on a W2 and never had a fee to pay. Being on K1 the only fee I’ve heard is that you can be penalized for not paying close to your tax burden when filing your extensions.

 

[Sharky]

Never heard of this.

Have had fees before for underpayment (quarterly taxes) and the first payment is due April 15

 

[Singleton]

Never heard of this fine and my fed has been above that a few times, before I started doing better tax planning

 

[500bbc]

@shintoooo what do you have to say about this???

Shintoo's at the bar, Fed just extended due date...

 

[shintoooo]

It’s most likely an underpayment penalty or failure to make estimated tax penalty that’s reducing his refund.

There is no such thing as a large refund penalty.

 

[Gramps]

refund?????? damn I had to PAY $6.00 this year. Maybe I should charge the feds a fee

 

[Roosky01]

Just getting ready to sign our forms and send off a $9k+ check to the SOB's.

 

[samsah33]

Yes, probably timing, even if you overpay, you cannot just send in your total tax burden at the end of the year, it needs to be remitted at least quarterly or you're deficient for not being where you need to be throughout the year or something like that...

 

[stephenkatsea]

I've been retired for 10 years and we live in Arizona. Since retiring, we have had no taxes with held. Our accountant prepares quarterly estimated tax payments. But, we opt to pay the entire estimated annual tax on the first quarter. Accountant hits it very close. We've never had to pay additional tax. It works for us. I'm not a fan of letting the Feds hang on to our money and determine how much that is going to be.

 

[Andy B.]

Just getting ready to sign our forms and send off a $9k+ check to the SOB's.

You make me feel a little better about my taxes I didn't pay that much but I'm sure a made less than you if that makes you feel better.

 

[boatpi]

don’t even talk to me about it. I don’t know where it goes obviously goes back in investing that company.well into six figures yearly
I work for the IRS.

 

[Rajobigguy]

The fee/fine is for something other than a large refund. I got a $93000 refund and paid no such fee.

 

[RitcheyRch]

Just getting ready to sign our forms and send off a $9k+ check to the SOB's.

I had to mail the Fed $68,802 and the State 31,002. There is no inheritance tax but my Dad's investments were listed as "tax deferred". I guess I'm the deferred.

 

[Sharky]

I only owe about $650 this year.

Sleepy FJB gave me a $7500 credit for buying an EV and about $1000 for an energy efficient split system.

Split system is for the garage but its "the house".

I'd say thanks Joe but, it was my money to begin with.

 

[SOCALCRICKETT]

I average a little over 10k back each year (I intentionally overpay to keep from getting a surprise) and haven't had to pay any type of penalty so far

 

[socal0487]

It’s most likely an underpayment penalty or failure to make estimated tax penalty that’s reducing his refund.

There is no such thing as a large refund penalty.

How do the FEDS figure quarterly payments? and the amount? Never had to do it until this year. First year filing married with dual incomes so was unsure on our tax withholding. I left it as it was for single to see where we'd fall. Now they tacked on 2400 quarterly payments even though we only owed 4500 to the FEDS for 2023?

 

[530RL]

How do the FEDS figure quarterly payments? and the amount? Never had to do it until this year. First year filing married with dual incomes so was unsure on our tax withholding. I left it as it was for single to see where we'd fall. Now they tacked on 2400 quarterly payments even though we only owed 4500 to the FEDS for 2023?

Taxpayers must generally pay at least 90 percent of their taxes throughout the year through withholding, estimated or additional tax payments or a combination of the two. If they don’t, they may owe an estimated tax penalty when they file.

This penalty that Shintooo is speaking of is called a penalty, but is in reality an interest charge on the underpayment. One owed tax, they didn’t pay the tax in a timely manner, so they have to pay interest on it.

One can end up with a refund, yet still owe this penalty or interest, because the total payments paid may exceed the total taxes owed, but they were paid later than the quarter in which they were due.

 

[McKay]

How do the FEDS figure quarterly payments? and the amount? Never had to do it until this year. First year filing married with dual incomes so was unsure on our tax withholding. I left it as it was for single to see where we'd fall. Now they tacked on 2400 quarterly payments even though we only owed 4500 to the FEDS for 2023?

We just always pay at least 110% of what my tax liability was the previous year. Sometimes on the 4th payment if it’s obvious we are not making what we did the previous year we will cut back.

 

[Kachina26]

So since I can't seem to get the withholding dialed in, can I claim exempt and then just send in quarterlies of an appropriate amount? Ever since they fucked with the W4 in 2020, I can't get it right.

 

[530RL]

So since I can't seem to get the withholding dialed in, can I claim exempt and then just send in quarterlies of an appropriate amount? Ever since they fucked with the W4 in 2020, I can't get it right.

If your only income is from employment, just file single with zero dependents on your W4 and you should be fine.

Maybe shintooo can jump in here.

 

[Kachina26]

If your only income is from employment, just file single with zero dependents on your W4 and you should be fine.

Maybe shintooo can jump in here.

I've gotten that suggestion before. I just don't understand why all the other options if they don't actually work.

 

[aka619er]

I've gotten that suggestion before. I just don't understand why all the other options if they don't actually work.

I also have my w4 as single with zero dependents and then file married jointly with the kids. Have been for a decade after my last CPA got me audited, fined and owed thousands. I was just watching a YouTube video yrsyerday and planned to go to the irs calculator website to try to break even now on. You need to input all income (my wife works as well) and any taxes paid this year off your pay stubs. Then it will automatically give you both w4's filled out with the appropriate withholdings to give to your employer. If it works out I plan to go again Jan1 and do it for next year. If not then back to my safe place of single and zero dependends on the w4.

 

[530RL]

I've gotten that suggestion before. I just don't understand why all the other options if they don't actually work.

I suspect it has to do with the state in which you live and the property tax and state income tax rate in that state.

The withholding tables are updated for inflation, but do not accurately reflect the loss of itemized deductions (SALT cap) as state taxes vary per state and there would be a need for a different table for each state. As a result, those in states with high property and state taxes need to withhold more than those in low state taxes to reflect the federal tax increase on them from the loss of itemized deductions in 2017.

Absent additional tax law changes, the SALT cap limit goes away after 2026 and state and local taxes will once again become deductible.

 

[McKay]

I suspect it has to do with the state in which you live and the property tax and state income tax rate in that state.

The withholding tables are updated for inflation, but do not accurately reflect the loss of itemized deductions (SALT cap) as state taxes vary per state and there would be a need for a different table for each state. As a result, those in states with high property and state taxes need to withhold more than those in low state taxes to reflect the federal tax increase on them from the loss of itemized deductions in 2017.

Absent additional tax law changes, the SALT cap limit goes away after 2026 and state and local taxes will once again become deductible.

Hopefully if Trump gets back in he will extent the SALT limits.