I made about $16,000 this year in freelance income from April-Sept thus far. Not much.
But instead of reporting the income next April, apparently I was supposed to be sending in payments on estimated taxes as early as this June.
Am I looking at only a couple hundred dollars in fines or penalties, or something whoppingly big?
It’ll be fine! We’ve done it before, and they charged a small penalty (like less than 1%) that included interest. Just pay it as soon as you can.
ETA: I just registered how little you’re talking about. You’ll really be fine.
You will be okay. My Bro is a retired IRS agent, and this is no big deal.
They may want a small penalty, but you can fight that due to the smallish amounts. Or just pay it.
My first year of freelance work, I completely didn’t even realize I had to pay quarterly. I dunno how much I made that year, but it was around $60K. I somehow didn’t even get penalized – I paid what I owed on April 15, and started paying quarterlies from then on. I believe I got no penalties because there are two ways to pay estimated taxes – either by paying what you owe (you need to pay at least 90% of current year taxes), or basing your payment on last year’s taxes and paying 100% of whatever they were (I was still paying taxes from non-1099 work at the time, and they covered what I had paid the year previous.)
I’ve also been a month late on estimates (paid September’s in October because I got my due dates mixed up), and similarly didn’t so much as even get a letter from the IRS. Meanwhile, I’ve gotten letters from the state about a check that they cashed, saying I missed a quarterly and threatening me with fees and interest (the amount wasn’t anything onerous.) That I had to fix up with a phone call.
We just found out my wife had her student loans forgiven. I sense disaster ahead. I WILL be calling H&R Block very soon, but if you have a kind word, now’s the time. Thank You.
You’re in a very large boat!
The IRS has a (well-deserved) reputation as a harsh and unyielding agency that will pursue you till the end of time, but it’s been my experience that if you’re acting in good faith and your lapse is understandable and you’re trying to fix it, they’ll work with you. As @pulykamell says, the state may be different, but in my case (New Mexico), as soon as I was able to talk to a person on the phone, they worked with me to clear it up.
Thanks for the good news.
And yes, the state was verrry different with our last return: we were contacted about 14 seconds after we filed and owed them something additional. We made payment promptly. Two weeks later, a check arrives in the mail for the same amount, labelled “Overpayment.” We’re keeping quiet about it; they know best, right? Right? RIGHT?? 
Last year I missed my June estimated tax payment ($12,454), and caught up in September by paying two quarterlies. No repercussions.
Thanks for the advice everyone, very helpful. I have another question; none of my clients have given me any sort of formal documentation of income (this is all really under-the-table casual cash-type work, etc.) In the event that the IRS wants to audit me or just demand documentation of some sort, do I just say “Well, there isn’t any so you just have to trust me?”
The IRS doesn’t worry about estimated tax until you file your return next year. It only becomes an issue then if you didn’t pay enough.
You can keep your own records of payment. If they’re suspicious, you may have to provide bank account records. Most of the time, though, they’ll accept your numbers.
The IRS is reasonable as long as there’s no evidence of fraud. If you make a mistake, there may be a fine, but they’ll usually let it go at that.
That was my experience as well. My first year doing 1099 work, I made about $50K. I had been warned that a significant portion would go to the IRS so I saved it all (the 1099 work was a side hustle from my real job to help me buy a house). I didn’t realize I should’ve been doing quarterly payments and paid it all in March. I did receive a letter from the IRS letting me know I needed to submit quarterly taxes and I started to do so going forward.
My days of side hustles are gone now, thankfully. Too many early mornings and late nights. I still do early mornings, but no more late nights for pay.
Forgiven loans are not income IF you are insolvent.
https://www.irs.gov/newsroom/what-if-i-am-insolvent#:~:text=A%20taxpayer%20is%20insolvent%20when,that%20the%20taxpayer%20is%20insolvent.
A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as income under the “insolvency” exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding …
I just want to point out that a lot of people are insolvent.
There is also this-
However, borrowers working toward loan forgiveness have been exempt from taxes thanks to the American Rescue Plan Act of 2021. This measure made forgiven student loans exempt from federal income taxes, but it only applies to loans that are discharged between January 1, 2021, and December 31, 20225.
The American Rescue Plan applies to all student loan forgiveness programs but only affects federal income taxes. Although some states adopted similar measures for state income taxes, not all followed suit.
Yep. The IRS does hate tax protestors, but they richly deserve that hate.
Just work with them, and usually they will work with you.
DrDeth, I truly appreciate your information, thank you. I’ll be dropping in on H&R Block this coming Monday just to ask the nice lady there whatever I can without getting charged for it.
BTW, you meant Dec. 31, 2022 or 2025?
I think it was 2025.
YES! You the man! I will sleep better tonight; thanks again.
Im positive I remember some bill passing in the last year or so that specifically added a “2” into a date to extend its sunset clause to an indefinite length - maybe this was it?
Went to H&R Block this past Monday and the nice lady said they have been told the deadline is Dec. 31, 2025. But they haven’t gotten the official paperwork, yet.
She also said your particular state might be a snot about it and demand taxes on the “forgiveness.” Time will tell.
I believe if they are forgiven under the Dept of Education programs it is not taxed but I’ll be checking on t myself.
Yeah, some states are not compliant with federal tax law. Mind you, they don’t have to be.
Most of my wife’s income is like that. Her clients don’t send her 1099s even though they should. We report all of it. What bothers the IRS is if you don’t report income that they know you received. They’re happy if you report more income than they know about. If you were to be audited (which is extremely unlikely), your clients would be the ones in trouble if they paid you $600 or more and didn’t send you a 1099.