At this time of year, with a few months remaining on the calendar, it can be a good time to review your income and withholding to ensure that you will have enough in tax payments to ensure that you don’t get hit with underpayment penalties next year when you file your return. This can be a relatively simple activity – all you need to do is gather your most recent pay-stubs and all of your other income information together and produce an estimate of your tax burden. You’ll then compare the estimated tax with the amount of withholding and estimated tax payments that you’ve made up to date. To do the estimates, you can use the worksheets available within Form 1040-ES, as well as the IRS’s Withholding Calculator online tool. (click the links to go to the tool or form) If your withholding is significantly less than the estimated tax […]
estimated tax
Estimated Tax Payments
When you have income from sources other than traditional employment, it often becomes necessary to make Estimated Tax payments since you don’t have withholding (as you would from traditional wages). This income may be from self-employment, rents or royalties, or from interest and dividends from your investments. Income of this variety may also be from pensions, Social Security, and IRAs or qualified retirement plans. Sometimes you can set up the payments from various sources to withhold tax payments and the provider will then send the withheld tax to the IRS on your behalf. These tax payments will be reported to you on your 1099R, SSA-1099, and/or other specific tax documents that you receive at the end of the year. If you don’t have another form of withholding, you may need to make estimated tax payments throughout the year. The IRS recently issued their Tax Tip 2013-49, which details Six Tips […]
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