I have recently received a notification from Berkheimer informing me that I owe Interest on the payment that I submitted with my Final Earned Income Tax return. The return was remitted on time and payment made in full. Why did I receive this notification?
The reason for the notification is based upon the fact that under ACT 32, individuals who have taxable income of $12,000, or more in any given tax year, on which the taxes due are not withheld on by an employer or are the result of self-employment, are required to file and pay the taxes due on a quarterly basis. Failure to do so subject the taxpayer to interest and penalties on the amounts assumed to be due for each quarter. Taxpayers whose finals contained payments equaling the tax due on $12,000 or more in a prior year receive forms from us to be used to make the needed payments. For tax year 2020 and forward the threshold to require quarterly estimates is reduced to $400.00 or more of income on which no tax is being withheld.
Here are the answers to many of the questions you may have on this notification.
How was the interest due calculated?
ACT 32 dictates that interest be calculated using daily rates, based on quarterly taxes owed which are overdue. The daily interest rate for 2023 is 0.000192%. If you made a payment of $625.00, here is how your interest was calculated:
The total tax amount due was $625.00, and you filed on April 15th, as required. Your quarterly assessment is $156.25 ($625.00 divided by 4). The amounts were applied as shown beginning April 15th to the due date shown.
Quarter 1 penalty and interest is charged beginning April 30, 2023 (350 days late).
Interest: 0.0672 X $156.25 = $10.50
Quarter 2 penalty and interest is charged beginning July 30, 2023 (259 days late).
Interest: 0.0497 X $156.25 = $7.77
Quarter 3 penalty and interest is charged beginning October 30, 2023 (167 days late).
Interest 0.032 X $156.25 = $5.01
Quarter 4 penalty and interest is charged beginning January 30, 2024 (75 days late).
Interest: 0.0144 X $156.25 = $2.25
Total Interest (rounded): $25.93
Act 32 also allows for the application of Penalties (.022% per day) to be applied to the amounts due if the request for payment of such is not received within 30 days of our written notification of the balance due to you. Therefore if the balance is not paid by the due date shown, you can be billed for penalties as well.
I am still self-employed/ work out of state or my employer does not withhold the taxes due, how do I determine what I should pay each quarter?
The normal rule of thumb is that you should utilize the amount of tax due on your prior year’s final return. Or if you are employed and receiving a salary, your current salary. You would then take that figure and divide by four (4). It would be this figure that you would base your quarterly remittances upon. Example: Your annual salary is $62,500. $62,500/4 = $156.25 per quarter. It would be this amount that you would report on each quarterly statement supplied to us.
What are the due dates for filings?
Filings are due 30 days after the close of each quarter, so returns are due on or before: April 30th, July 30th, October 30th and January 30th of the following year.
What happens if I under pay and still owe at the time of my next year’s filings?
If you have filed and paid your current year estimated payments based on what you owed in the prior year or the amount paid throughout the year, is within 90% of what is due this year, there is no interest applied when you file your return next year. You would simply pay the difference at that time. You would then want to adjust your remittances for the following year accordingly.
What happens if I overpay my estimates for the year?
At the time of filing the return for the year in question you will have three (3) options to choose from. You can either utilize the payment as credit for the coming year (we will apply it as your 1st quarter payment), request the overpayment to be refunded to you or if you have a spouse and they owe taxes, apply it as a credit to their return. You can also use these options in conjunction with each other and apply the overpayment as needed.
Can I pay the full estimated tax for the year in the first (1st) quarter?
Yes, you can certainly do so. If you intend to do so you should submit all four (4) quarterly stubs along with your payment and indicate the amount to be applied to each. We will then apply the payments to each quarter as indicated.
I discarded the forms you sent to me for this year, how can I submit my payment?
You can submit your quarterly returns online and select a payment date for each quarter. Click here to proceed with submitting quarterly returns via our efile portal.
If you prefer, you can download forms from our website at. Click here to download a DQ-1 form.
If you have any additional questions on this matter you can contact us by phone (866-701-7206) and/or by e-mail. Click here to email us.
