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Posted by ed on March 27, 2008, 9:52 am
Please log in for more thread options > I've never needed to do estimated tax before. This seems like a
> really basic question, but I can't quite seem to get an answer from
> the instructions ...
>
> I know the payments need to be made quarterly and "on time"
> (basically within 15 days of quarter's end).
>
> But must they (or can they) be four EQUAL payments, regardless of
> how income is spread out during the year ? For example, if most of
> my income occurs in the first quarter (for example, a big consulting
> contract), is it ok to spread my estimated tax payments into 4 equal
> installments, one each quarter ? What about the flip side, where one
> gets a big income the LAST quarter of the year, and had no way of
> knowing the three earlier quarters' payments needed to be larger ?
>
> Thanks, John
>
> > Thanks, John
>
> --
> << ------------------------------------------------------- >>
> << The foregoing was not intended or written to be used, >>
> << nor can it used, for the purpose of avoiding penalties >>
> << that may be imposed upon the taxpayer. >>
> << >>
> << The Charter and the Guidelines for submitting posts >>
> << to this newsgroup as well as our anti-spamming policy >>
> << are atwww.asktax.org. >>
> << Copyright (2007) - All rights reserved. >>
> << ------------------------------------------------------- >>
As long as you pay 1/4 of either last yer's tax, or 90% of the current
year final tax each quarter, on time, you'll have no penalty Those
and oweing less than $1,000 are called "safe Harbors". If you pay
more in early quarters you can pay less in later quarters. If you
pay less in early quarters you'll have a penalty.
If you income is more in early quarters, ignore it because the IRS
looks at your total taxes for the year when figuring the 90% of
current year's tax. If your income is more in later quarters you can
use the Annualized Income Method to tell the IRS that your
installments were based on the amount of your taxes each quarter using
that Method. This could eliminate the penalty for NOT paying evenly.
SO, You don't have to pay evenly or even on time, but if you're
payments are late or not equal you can't use the "Short Method" to
figure any penalty, and if they don't meet any of the "safe harbors"
you willl incurr a penalty, and the AI Method might reduce or
eliminate that penalty. ed
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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