If you're an employee, your employer withholds taxes
from every paycheck and sends the money to the IRS, and probably to your
state government as well. This way you pay your income taxes as you go.
And, if you're like most wage earners, you get a nice refund at tax
That depends on your situation. The rule is that you must pay your taxes as you go.
at filing time, you have not paid enough income taxes through
withholding or quarterly estimated payments, you may have to pay a
penalty for underpayment.
you answered "no" to all of these questions, you must make estimated
tax payments using Form 1040-ES. To avoid a penalty, your total tax
payments (estimated taxes plus withholding) during the year must satisfy
one of the requirements we just covered.
That depends on your situation.
The safest option
to avoid an underpayment penalties is to aim for "100 percent of your
previous year's taxes." If your previous year's adjusted gross income
was more than $150,000 (or $75,000 for those who are married and filing
separate returns last year), you will have to pay in 110 percent of your
previous year's taxes to satisfy the "safe-harbor" requirement. If you
satisfy either test, you won't have to pay an estimated tax penalty, no
matter how much tax you owe with your tax return.
If you expect
your income this year to be less than last year and you don't want to
pay more taxes than you think you will owe at year end, you can choose
to pay 90 percent of your estimated current year tax bill. If the total
of your estimated payments and withholding add up to less than 90
percent of what you owe, you may face an underpayment penalty. So you
may want to avoid cutting your payments too close to the 90 percent mark
to give yourself a little safety net.
If you expect your income
this year to be more than your income last year and you don't want to
end up owing any taxes when you file your return, try to make enough
estimated tax payments to pay 100 percent of your current year income
You need to come up with a good estimate of the income and deductions you will report on your federal tax return.
can use TurboTax tax preparation software to do the calculations for
you, or get a copy of the worksheet accompanying Form 1040-ES and work
your way through it. Either way, you'll need some items so you can plan
what your estimated tax payments should be:
One easy way to get a jump on paying your next year's
taxes is to apply your previous year's tax refund to your next
year's taxes. If you won't have federal income tax withheld from wages,
or if you have other income and your withholding will not be enough to
cover your tax bill, you probably need to make quarterly estimated tax
payments. Having all or part of your overpayment applied to your
estimated taxes is a relatively painless way to take care of at least
some of what you owe for coming year.
You could end up owing the IRS an underpayment penalty
in addition to the taxes that you owe. The penalty will depend on how
much you owe and how long you have owed it to the IRS.
Result: You will have to write a larger check to the IRS when you file your return.
Usually, you pay your estimated tax payments in four
equal installments. But you might end up with unequal payments in some
You calculate that you need to pay $10,000 in estimated
taxes throughout the year, and you don't make your first payment until
June 15 (when the second estimate is due), so your first payment will be
$5,000. Your September payment and your January payment will be $2,500
each. However, you may still owe an underpayment penalty for the first
You have special criteria to meet, but you may end up
paying less in estimated taxes. You're considered a qualified farmer or
fisherman if you earn more than two thirds of your gross income from
farming or commercial fishing.
If you're not sure you qualify, or
how this all works, TurboTax can help you figure your gross taxable
income and what fishing and farming income you can include as qualified
DO NOT USE IT!!!!!!!! i know this is bad, but i wasnt sure they did it right and when i went back to find out what i was doing wrong and they missed $3000
Quoting capmonkey93:DO NOT USE IT!!!!!!!! i know this is bad, but i wasnt sure they did it right and when i went back to find out what i was doing wrong and they missed $3000
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