What is the Penalty?

Today TaxMama hears from Rebecca in the Carolinas who has this problem, “I’m on payroll; so I have withholding. But my husband is supposed to pay quarterly taxes, because he is self-employed. He didn’t do it at all in June. I got concerned. So I used the voucher and mailed a scant $100.00 check. It was all I could afford. September is near. What are the penalties for just ignoring this the way he wants to?”

Dear Rebecca,

Yes, I can see that you’re upset. And if you’re filing a joint return with your husband, you have good reason to worry.

But, not because of the penalties. The penalties aren’t really all that high. In fact, I’ve seen instances where someone owed $20,000 on April 15th, but the underpayment penalties

were under $1,000.

The real problem you’re going to face, is paying the unpaid taxes in full on April 15th.

Let’s face it, if your husband doesn’t have the money to pay the taxes he owes on this quarter’s income, how is he going to set aside enough money to pay for all four quarters by April?

He’s already not managing his money in a businesslike fashion. And being married, he pulls you down with him. Even if you file separately, to avoid having your wages attached when he owes taxes, you’ll still have problems.

1) Both of you are apt to pay higher taxes by filing married filing separately
2) If your income would have been low enough to qualify for an Earned Income Credit, you would lose it.

3) If he uses your joint account for his business, instead of a separate business account, that will be attached by IRS when he ignores the notices and doesn’t pay.
4) He’d still have to pay the taxes on his income somehow. And, ultimately, it will come from joint funds. Which will cost you more when you add in the future penalties and interest.
5) WORST OF ALL, you’ll constantly be fighting and arguing.

This is the kind of neglect that grows to break up marriages. I am really, really sorry to tell you this.

And I know your husband is really irked that you’re nagging him about this. But, this is important.

Start setting aside the money for the next estimated payment NOW. And start setting aside money towards the rest of the April balance as soon as you can.

Unless you both do some really good tax planning, your husband should always set aside 25% of his income each month for taxes.

Then, you’ll always have your taxes paid up – AND perhaps some extra left over to pay for tax advice to cut future bills – AND maybe even money left over for a vacation.

And remember, you’ll find answers to lots of questions about marital tax issues and other tax information, free. Where? At TaxMama.com

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