Estimated Taxes - Quickfinder - Pages 16-6
Ø What are the estimated tax due dates?
For the 2019 Tax Year the due dates for estimated tax payments are 4/15/2019, 6/17/2019, 9/16/2019 and 1/15/2019.
Note: A 4th quarter payment is not required if taxpayer files tax return and pays any tax owed by January 31.
Ø What are the estimated tax safe harbor requirements?
To avoid the underpayment penalty you must withhold or pay in estimated tax payments at least:
· 90% of the tax shown on your current year’s tax return or
· 100% of the tax shown on your prior year’s return [110% if AGI is over $150,000($75,000 MFS)]
Ø If I miss a payment for one quarter, can I make it up by paying more in the next payment?
A taxpayer who underpays a quarterly tax payment cannot avoid the underpayment penalty by overpaying the next installment. In contrast, an employee who has insufficient withholding midyear can eliminate an underpayment penalty by increasing withholding for the remainder of the year because withholding is considered to be paid in four equal installments.
Ø What is the penalty for underpayment?
There is no set penalty for underpayment. Factors such as how much was under withheld and how late the quarterly payments were will determine the amount of the penalty. Taxpayers can fill out IRS Form 2210 to estimate what their penalty might be.
Ø How is the underpayment penalty calculated?
The underpayment penalty is calculated by completing Form 2210. However, Form 2210 is not filed with your tax return unless an exception to the underpayment penalty applies. The IRS will compute any underpayment penalty and bill the taxpayer. No interest on the penalty will be due if the taxpayer files their return by the due date and pays the penalty by the date specified on the bill they receive.
Ø What are the exceptions to the underpayment penalty?
· Request for Waiver – The IRS may waive the penalty in the case of casualty, disaster or other unusual circumstances
· Annualized Income installment method – Required quarterly payments can be calculated based on actual income and deductions each quarter. If income was higher in later quarters of the year, this method may reduce the penalty by lowering required quarterly payments at the beginning of the year.
· Using actual payment dates for withholding – Withholding for wages and other payments is considered to have been paid in four equal installments. A taxpayer can choose to apply withholding to the quarter it was actually paid. This can reduce the penalty if a large amount of tax was withheld early in the year.