Uncle Sam Keeps Ringing: Estimated Taxes
Now that you are done with this year’s taxes, you can start worrying about next year’s taxes—and whether you need to pay estimated taxes.
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The need to file an estimated return is tied to a penalty for underpaying your taxes, notes CCH, a leading provider of tax, accounting and audit information. Individuals are expected to pay almost all their tax—through withholding or estimated taxes or both—before filing on April 15. If you fall short by more than a certain amount, you have to pay a penalty and generally have to file an estimated return for the following year, along with the first of four quarterly payments.
What is that “certain amount,” and what can keep you clear of penalties and estimated tax?
Simplifying somewhat, if you owe less than $1,000 when your return is due, you won’t owe a penalty, and you can avoid estimated tax if you figure that you won’t owe more than $1,000 when you file next year’s return.
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