Here’s a common question that we have from taxpayers:
How do I know if I have to file quarterly individual estimated tax payments?
Answer: Generally, you must make estimated tax payments for the current tax year if both of the following apply:
1. You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding, and
2. You expect your withholding to be less than the smaller of: (a) 90% of the tax to be shown on your current year’s tax return, or (b) 100% of the tax shown on your prior year’s tax return.
Caveat, this general rule doesn’t really apply to certain higher-income taxpayers or nonresident aliens.
However, the best reason (and the most practical) to make estimated tax payments? It’s a great way to ensure that you don’t end up on the IRS list with a bill you can’t pay!
Until next week,
PS If you or someone you know has an IRS bill you can’t pay, here’s a link to schedule an appointment with us so we can help you.