Penalties Are Rising on Late Tax Payments

 Estimated Taxes

In most cases, you must pay estimated taxes for any year if both of the following apply.

a)  You expect to owe at least $1,000 in tax for the tax year, after subtracting your withholding and refundable credits. 

b)  You expect your withholding and refundable credits to be less than the smaller of:  90% of the tax to be shown on your current tax return, or 100% of the tax shown on your prior year tax returns; 

Note. The above percentages may be different if you are a farmer, fisherman or higher income taxpayer.

 

Tax Tip: The purpose of making estimated tax payments is to avoid underpayment and late payment penalties and interest. The years estimated taxes must take into consideration the following factors: 
  

a) New 4.6% tax for the high earners;

b) New 0.9% Medicare tax; and,

c) New 3.8% NIIT explained before

In addition, preparation of quarterly financial statements for business would be instrumental in calculating accurate estimated taxes.

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