Maybe this was just a weird blind spot I had for way too long, but I didn't even know individuals were supposed to pay QET. I spend a fair amount of time on finance forums and I've never even seen it mentioned until a few days ago. And I've seen plenty of ads for tax filing services (H&R Block, etc.), and I've never seen one say something like, "Don't forget to pay your quarterly taxes for your side gig!" or something like that. So now I'm reading about it and I feel like I'm in a Twilight Zone episode. I remain skeptical that all poker players and Twitch streamers and guys who happen to have a lot of capital gains one year are duly making their quarterly tax payments, or even know that QET is a thing.

Am I wrong about this? It does seem very easy for the IRS to just automatically hit you with a penalty whenever your tax bill is over $1000 when you file yearly, but maybe they don't? I think I've just been super lucky that I've always been diligent enough about keeping my taxable income so low that I've never had a bill over $1,000 before. So I haven't tested it myself as to whether the IRS just lets it slide usually, or ever.

Any comments?

I do it.

I owe at least 4 figures pretty much every year and never pay quarterly. I just pay the fine instead.

If you have a real job wiith withholding you don't really have to worry about it. When I was trading on my own dime I used to pay them every quarter. Nowadays over 90% of my trading is in tax free accounts so I don't worry about it. But if you run your own bidness without witholding you should definitely do your quarterlies.

Why? The guy above you said he just pays the penalties, which I've heard are just a low amount of interest. (SOFR? Even less?)

This

Why pay a fine if you don't have to? Plus if its only 4 figures the fine is likely small. But still why pay a fine. Until just recently you couldn't really get much in the way of interest and even now probably doesn't overcome the fine.

The fine is 0.5% of the amount owed each month. This conversation is the most I have thought about my quarterly taxes in years.

The IRS doesn't let failure to pay slide. However, having a tax bill under $1,000 is not the only way to avoid this penalty: "Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller."

Source: https://www.irs.gov/businesses/small...stimated-taxes

I've been self-employed for 30 of the last 32 years. When I had a lot of credit card debt, I didn't pay QET because the combined fines and interest from the IRS was significantly less than the interest I was paying on my credit cards—something like 12% vs. 18%. Otherwise, I have paid QET, though usually not more than 100% of my tax bill for the prior year.

I consider myself a normal person.

So 6% a year. Probably more since it likely compounds each month. So people would actually set money on fire than pay their taxes on time? I don't get it.

Well it depends what you can use that money for elsewhere or if you need to live on it. In theory you'd be better off not paying and putting it into the SP500.

W2 employees should adjust their W4 to zero withholding and then pay estimated quarterly taxes. Not only do you maintain better control of your money (paying quarterly rather than biweekly) but you also can pay your quarterly taxes with a credit card, and it’s easy to earn rewards whose value exceeds the 1.87% credit card fee.

Makes no sense to me either - you’re going to owe the tax, why pay an extra 6% to be late

This represents what is wrong with society and views on money. If you can’t pay taxes, you are living beyond your means and either need to cut spending or increase earnings. A person that tries to create their own game of not paying taxes, paying the fines at end of the day and putting some $ in brokerage account to try and squeak out 1-2%…..guarantee their finances will NOT be in good shape.

Yeh and sometimes life happens - not everyone is prepared for medical emergencies, getting fired from their jobs, businesses going under, etc. You shouldn't be so judgy from your mom's basement.

All of those examples are things that happened….as opposed to intentionally not paying estimated taxes and paying 6% fine.

Mom’s bringing the meatloaf…we want it now!!!

so someone who's guaranteeing avoiding 6% fine is a responsible person, but someone trying to pick up 2% is playing an irresponsible game. Got it.

Pretty much. If the risk free rate were 6.5% you would be a fool to pay quarterly taxes. But it isn't. Anything less is a gamble. Not that there is anything wrong with gambling. I just think there are better gambles. Paying the fine on taxes is like letting your credit card run and making minimum payments.

My point was if someone attempts this re: estimated taxes, I’m willing to bet you will see a number of other money leaks. I’ve done a fair amount of reading on personal finance and see how habits and views on debts/money can lead to relative success or failure.

If you need it to live, the fine is the very least of your worries. But if that is the case, you done gone ****ed things up, in theory of course. You gonna fix all your problems by April 15th?

So, we have to pay attention to variance too?!? No! The stock market returns 8% at all time frames no matter what!

Y'all talking about like $50 in penalties.

Depends on how much you make. I would feel it if my taxes were raised by 6%

By the same token, I see this as a habit of evaluating how you spend your money correctly. Of course you can't guarantee you'll beat 6%, but if someone is smart, it's probably a good gamble to think you can beat it. The habit of looking at interest rates and opportunity cost of money is a good habit, not a bad one.

It’s actually more than 6% now for the penalty although people don’t realize it yet.

The penalty for underpayment is actually the Fed short term interest rate (formerly the Fed funds rate, now moreso the SOFR rate) + 3%. The floor is 6%.

Given that we had been in ultra-low interest rate environment since 2008 the penalty was basically always the floor of 6%. Now that we are in a higher rate environment it is actually more like 8% (approximate 5% Fed rate + 3%).

Smart people don't have to gamble for small wins with their liabilities. They gamble with their assets.