Illinois Estimated Tax Penalties.

[T. S. Chomicz]

Last night I was reading Form IL-505 (Illinois penalty
for underpayment of estimated taxes) and I was really
surprised by what I saw. I was wondering if someone
could comment on whether my conclusions are correct:

The form seems to indicate that there is a 15%
flat-rate penalty for the amount of underpayment
each quarter, even if the payment is one day late.
Note: this is not a 15% annualized rate like the
Federal penalty, this is a full 15% of the late
amount regardless of how long it is late. (So if
the required payment is $100, the penalty is $15
regardless of how late it is.)

The only payments counted against the required
quarterly payment are payments received during
the quarter plus any cumulative overpayment from
previous quarters.

So here are my conclusions that I would like to see
someone comment on: It seems that if you are even one
day late paying a quarterly installment, you might as
well not bother until next April 15. If late in the
year you discover you have been underpaying previous
quarters, there is no point in trying to make up the
underpayment until next April 15.

I think this is a dramatic change in Illinois tax law
from last year. I also realize that this is very
different from the way federal underpayment penalties
are calculated.

I looked through dejanews and didn't find this topic
previously discussed, so I would welcome any comments.

Thanks is advance.

[Albert Cheng]

to...@marconi.ih.lucent.com (T. S. Chomicz) writes:

> Last night I was reading Form IL-505 (Illinois penalty
> for underpayment of estimated taxes) and I was really
> surprised by what I saw. I was wondering if someone
> could comment on whether my conclusions are correct:
>
> The form seems to indicate that there is a 15%
> flat-rate penalty for the amount of underpayment
> each quarter, even if the payment is one day late.
> Note: this is not a 15% annualized rate like the
> Federal penalty, this is a full 15% of the late
> amount regardless of how long it is late. (So if
> the required payment is $100, the penalty is $15
> regardless of how late it is.)

I needed to pay penalty for Illinois tax too. I
could have used the more complex altenative of
calculating exactly when sudden income came (mostly
late year capital gains) but I figured the saving
was too small to worry (plus the fact I had only
4 hours before midnight of the 15th. :-) Illinois
did charge at a higher rate than the Federal rate,
at least my case confirmed.

> So here are my conclusions that I would like to see
> someone comment on: It seems that if you are even one
> day late paying a quarterly installment, you might as
> well not bother until next April 15. If late in the
> year you discover you have been underpaying previous
> quarters, there is no point in trying to make up the
> underpayment until next April 15.

First of all, you could be 1 day late in paying the due
tax but you could have the money on the 1st of the quarter,
thus in theory, you could be 1 quarter late. (gee, I am
defending the "oppressor"? :-) It is not true that
it is useless to pay up late in the year. Even if you
owe tax, but if your total state withheld is equal to
the previous year liability or 90% of current year,
you need not pay penalty. Very similar to Fed. rules.
So, it is worthwhile to do some tax calculation by
november.