Kathryn Bruns, CPA
Estimated Tax Needs
Hello clients and friends:
Many of you have retirement income withdrawals, business income, rental income, or other income for which no one is withholding taxes and remitting to the IRS during the year on your behalf. This could lead to a large tax due at tax time, as well as penalties for not sending in estimated taxes during the year. Here's the rules on this:
General rule: In most cases, you must pay estimated tax for the current year if both of the following apply. 1) You expect to owe at least $1,000 in tax for the current year, after subtracting withholding and refundable credits, and 2) You expect your withholding and refundable credits to be less than the smaller of: a) 90% of the tax to be shown on your current year tax return, or b)100% of the tax shown on your previous year’s tax return, if your previous year’s return covered all 12 months.
As always is the case in the tax world, there are exceptions.
If you don't pay in estimated tax when you should be on a quarterly basis, you may be subject to penalties. Although the penalties aren't that large (relatively speaking), why pay the government more than you have to? Don't you feel you are paying enough of your hard earned money in taxes?
If you aren't having me formally perform the calculations for you quarterly, and you'd like a review of this now that we are mid-way through 2019 to ensure no surprise big tax due on your return and minimize penalties, please feel free to reach out.