The pain of paying estimated quarterly taxes.
Well it’s that time again tomorrow. If you file estimated quarterly taxes, better have your check book ready. This year the payments are really hurting to send in. The reason is your estimates are based on your previous years earnings. Well this year my earnings are down quite a bit. Sending in these payments is taking a much larger chunk of income than it did last year. I know I’ll get back the difference when I file my final yearly return, but still…
I guess I wouldn’t mind taxes as much if I thought the system was more fair, but it is sorely unfair right now. There is so much government waste and fraud that I feel my money is being flushed away. I see pictures on the news of hundreds of unused FEMA trailers sitting and rotting away in a parking lot down south. I think, one of those should be MY trailer, I bought it!
Anyway…that is my tax rant for the day.
Engineer
2. August 2007 | 21:53 hI’m not in the situation of having to pay estimated taxes, and avoid it by adjusting my withholdings from my salary to cover other income.
I would recommend studying the IRS forms about how it is determined whether or not you under withheld and if so how the penalty is calculated.
I believe that you are not charged a penalty if:
– you make your estimated tax payments on schedule
or
– your quarterly estimated payments are at least 22.5% of your actual taxes for the year.
But don’t take my word for it. Check it out on http://www.irs.gov, starting with http://www.irs.gov/publications/p505/index.html. If you’re sure your income for the year will be reduced, you may be able to reduce the next two estimated payments. If you get an unexpected windfall late in the year, you may have to pay a penalty.