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Saturday, October 18, 2008

Planning For Taxes

I'll admit it, more arguments start in our house over money than anything else. Other than that, my husband and I get along just fine. And the money arguments are more along the lines of my husband's "I hate taxes and I don't want to pay them this time, the government can just wait another week or two" to my "but we have to pay them on time". I keep thinking if we could just plan better, it wouldn't be such a hot issue between us. The money for the taxes would be sitting in the bank ready to go. Did you know you can pay quarterly estimated tax payments electronically and not have to send in a check?
Here is information from the IRS website regarding estimated tax payments:
Topic 355 - Estimated Tax

The federal income tax is a pay–as–you–go tax. This means the tax must be paid on income as it is received. Tax is generally withheld from your wages or salary before you receive it, and may also be withheld from other types of income such as pensions and unemployment compensation if requested. However, tax is generally not withheld from income such as alimony, interest, dividends, rental income, self–employment income, and capital gains. You may be required to pay estimated tax on these types of income. Estimated tax is the method of paying tax on income not subject to withholding and on other income from which not enough tax is withheld. Generally, you do not have to make estimated tax payments if your prior year's tax return will show no tax liability.

Generally, you should make estimated tax payments for the tax year if you will owe more than the amount specified by law, after withholding and credits, and the total amount of tax withheld and your credits will be less than the smaller of:

1. 90% of the tax to be shown on your current year's tax return, or
2. 100% of the tax shown on your prior year's tax return, if your prior year's tax return covered all 12 months of the year. However, if your prior year's adjusted gross income exceeded the amount specified by law for your filing status for the current year, then your tax withheld and credits must total 110% instead of 100% of your prior year's tax.

Refer to Form 1040-ES (PDF) to figure your estimated tax liability for the current year.

Your first estimated tax payment for each year is due April 15th. You may pay the entire year's estimated tax at that time, or you may pay your estimated tax in four payments.

The four payments are due April 15th, June 15th, September 15, of the tax year and January 15, of the following year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. You may have to pay a penalty if you do not pay enough tax through withholding or estimated tax payments, or if you fail to make required estimated tax payments by the due dates. Estimated tax payments are used to pay all the taxes on your return, including federal income tax, self–employment tax, and household employment tax. Topic 306 provides additional information on the estimated tax penalty.

Estimated tax requirements are different for farmers and fishermen. Publication 505 , Tax Withholding and Estimated Tax, provides more information about these special estimated tax rules and about estimated tax in general. - see for more information on tax payment.

Daddy's Little Tax Deduction shirt

Daddy's Little Tax Deduction


Hand Me Over! shirt

Hand Me Over! by teewitbaby

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