interest and penalties - safe harbor

[Mike Dymski]

I received an IRS tax notice with interest and penalties that related to the balance due with the filing of the extended return in October.  Tax withholdings were well over 110% of the prior year tax liability; so, I am comfortable that the penalties will go away.  Does the interest go away as well or is that due regardless?  Intuitively, it seems like there should be no interest due if no tax was due based on the 110% safe harbor but I don't know what I don't know.

[Ricky A.]

Since no one has chimed in, I'll give my $0.02...

I'm not a CPA and I could be 100% incorrect, but my understanding is that, even if you're making estimated payments based on safe harbor, you're still required to be completely paid up on April 15th regardless of whether you're filing then or extending until October.  

Taking a quick look at Form 4868 seems to support this (though maybe you can avoid the late payment penalty if at least 90% of your total tax had been paid by the regular due date):  https://www.irs.gov/pub/irs-pd...

Here are the relevant form instructions that I'm referencing:

Interest
You’ll owe interest on any tax not paid by the regular due date of
your return, even if you qualify for the 2-month extension because
you were out of the country. The interest runs until you pay the tax.
Even if you had a good reason for not paying on time, you will still
owe interest.

Late Payment Penalty
The late payment penalty is usually ½ of 1% of any tax (other than
estimated tax) not paid by the regular due date of your return, which
is April 18, 2022. It’s charged for each month or part of a month the
tax is unpaid. The maximum penalty is 25%.
The late payment penalty won’t be charged if you can show
reasonable cause for not paying on time. Attach a statement to your
return fully explaining the reason. Don’t attach the statement to
Form 4868.
You’re considered to have reasonable cause for the period
covered by this automatic extension if both of the following
requirements have been met.
1. At least 90% of the total tax on your 2021 return is paid on or
before the regular due date of your return through withholding,
estimated tax payments, or payments made with Form 4868.
2. The remaining balance is paid with your return.