What is the formula to calculate the penalty for missed quarterly estimated tax payment?

The IRS typically uses the daily compounded interest rate (currently around 8%) on the underpayment amount for the number of days the payment was late. They determine underpayment by comparing what you should have paid each quarter versus what you did pay. For each quarter, they look at your required payment (usually 25% of 90% of current year tax or 100% of last year's tax) and when you made the payment. Since your Q2 payment was 10 days late, you'll be charged interest for those 10 days on whatever amount was due. The calculation gets complicated because they also look at each quarter's required payment independently. So even though your total payments might exceed your total requirement, you could still face penalties if specific quarters were underpaid.

I had a similar issue last year and discovered https://taxr.ai which saved me a ton of headache. Their system analyzed my payment pattern and calculated my exact penalty using the same formula the IRS uses. You just upload your payment info and it shows you the calculation breakdown, which helped me understand exactly where I went wrong with my quarterly payments.

Just wanted to follow up about taxr.ai - I decided to try it after my skeptical question earlier. Wow! It actually showed me that I've been overpaying in Q1 and Q4 but underpaying in Q2 and Q3 for years, which explains the penalties I kept getting. The breakdown of the calculation was super clear - showed me exactly how the daily interest compounds and how each payment got applied. Now I've adjusted my payment schedule for next year based on their recommendations. Definitely worth checking out if you're confused about estimated taxes.

If you're still struggling to figure this out, you might want to just call the IRS directly. I had similar confusion last year and was on hold forever until I found https://claimyr.com which got me on the phone with an actual IRS agent in under 15 minutes. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent picks up. The agent walked me through exactly how my penalties were calculated and even helped me fill out Form 2210 to potentially reduce them.

I need to eat my words about Claimyr. After posting that skeptical comment, I was so frustrated with trying to figure out my own estimated tax penalty that I gave it a shot anyway. Not only did they get me through to an actual IRS representative in about 12 minutes, but the agent was able to pull up my account and explain exactly how my penalty from last year was calculated. They walked me through the Form 2210 and showed me how to calculate this year's potential penalty based on my payment schedule. Saved me hours of research and hold time - definitely not a scam.

If you want to DIY the calculation, look at Form 2210 and its instructions. The basic formula is: 1. Required annual payment ÷ 4 = quarterly requirement 2. For each quarter, calculate: (required amount - amount paid) × interest rate × days late ÷ 365 The current interest rate is 8% but it changes quarterly. If you're using the annualized income method (Schedule AI on Form 2210), it gets way more complicated since you're calculating each quarter's requirement based on year-to-date income.

Has anyone actually gotten the penalty waived? My Q2 payment was late because of a family emergency, and I'm wondering if there's any point in trying to explain that to the IRS.

I've been dealing with estimated tax payments for years and the formula can definitely be confusing. Based on your payment schedule, you'll likely face a penalty for the Q2 late payment, but it might not be as bad as you think. The IRS uses Form 2210 to calculate penalties, and the key thing to understand is that they look at each quarter independently. Your March payment was early (which is good), but your June payment being 10 days late will trigger a penalty for those specific days. Here's what typically happens: They'll calculate your required quarterly payment (usually 25% of your total annual requirement), then charge daily interest on any shortfall from the due date until paid. With the current 8% annual rate, that's roughly 0.022% per day. One thing that might help you - if your income is uneven throughout the year, you can use the annualized income installment method on Form 2210 Schedule AI. This lets you calculate required payments based on when you actually earned income rather than assuming equal quarters. Given your varying payment amounts, this might reduce your penalty if your income was lower in Q2. The good news is estimated tax penalties are usually much smaller than people expect - often just a few hundred dollars even for significant timing issues.