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Do I Have To Make Estimated Tax Payments?

9/26/2015

 
What are estimated taxes?
Estimated tax is a method of paying taxes that, for one reason or another, are not subject to withholding, or if the tax withheld from your paycheck is not enough to cover your tax liability for the year. For the most part, these payments are due quarterly. 

How do I know if I am responsible for making estimated tax payments?
It can be a little confusing to figure out whether you might be responsible for making estimated tax payments. Self employed people as well as S corporations, partnerships, and sole proprietors are all responsible for making estimated tax payments. Additionally, if you had a tax liability from a prior year, you may have to start making estimated tax payments. 

If an entity or individual is expected to owe over $1,000.00 when they file, they must make estimated payments or be subject to a penalty, unless one of the following two conditions apply:


  1. The amount of taxes paid through withholding, combined with refundable credits is at least 90% of what is owed in the current year OR
  2. The amount of taxes paid through withholding, combined with refundable credits is equal to or greater than total tax due in the previous year.  

If you can meet one of these conditions, you are not required to file estimated payments. If all your income is subject to withholding (e.g. you receive a paycheck), you are likely not responsible for making estimated income tax payments.

Where can I get help?
If you are unsure if you owe estimated taxes, or you do not know how much to pay, contact us and we'll be happy to help you do the calculation.
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