Comments on: The pain of paying estimated quarterly taxes. http://www.daysleft.com/31/the-pain-of-paying-estimated-quarterly-taxes/ Retirement and Finance Blog Fri, 21 Nov 2008 08:16:22 +0000 http://wordpress.org/?v=2.6.3 By: Engineer http://www.daysleft.com/31/the-pain-of-paying-estimated-quarterly-taxes/#comment-20 Engineer Fri, 03 Aug 2007 02:53:45 +0000 http://www.daysleft.com/31/the-pain-of-paying-estimated-quarterly-taxes/#comment-20 I'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 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. I’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.

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