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Got hit with a $600 penalty because I miscalculated my Q3 estimated payment
I was sitting in the station last October after a call, opened my IRS notice, and nearly dropped my coffee when I saw the penalty for underpaying by $1,200 on my Q3 estimate. Turns out I forgot to account for a big freelance project I landed in July, and it threw off my whole safe harbor. Has anyone else had a surprise penalty from a mid-year income spike?
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evan_grant702mo ago
I had almost the EXACT same thing happen in 2021 when I picked up a three month consulting gig in August. My safe harbor was shot after that. What worked for me was immediately adjusting my Q4 withholding through my W-4 at my day job to cover the shortfall. I claimed like 5 extra allowances just for that quarter, and the IRS treated the extra withholding as if it happened evenly all year, which wiped out the penalty. Then I set up a separate savings account for 30% of every freelance check so I never miss an estimate again.
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zaranelson2mo ago
Wow I actually read somewhere that the IRS lets you do that with withholding, super smart trick!
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wyattramirez2mo ago
Yeah that W-4 withholding trick is genius for saving your tail.
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