Tax Guru – Ker$tetter Letter

Q:

Subject: extension question

 

Dear Kerry,

 

We have filed for an extension, and need to send in an estimated payment of what we think we owe for 2005.  Since we have not yet met with our accountant we are not confident about whether we have over or under estimated?  Should we be concerned about this one way or another?  I know if we underpay we are charged interest on the difference.  What if we overpay?   Do we get this money back?  If we overpay by alot, is this an issue?

 

Thanks

A:

It’s generally better to overpay, which is why I round up when doing the rough calculations for clients’ extensions.

Any overpaid amount showing on the actual 1040 can either be applied to your 2006 1040 or refunded to you in a check.  There won’t be any interest paid to you, but for most people, the peace of mind not worrying about underpayment penalties more than compensates.

Your personal professional tax advisor should be able to explain this to you.

Good luck.

Kerry Kerstetter