According to the IRS, estimated tax is the method used to pay tax on income that is not subject to withholding (for example, earnings from self-employment, interest, dividends, rents, alimony, etc.). Generally speaking, you must pay estimated tax payments if both of the following apply:
- You expect to owe at least $1,000 in tax for 2016, after subtracting your withholding and refundable credit.
- You expect your withholding and refundable credits to be less than the smaller of:
a. 90% of the tax to be shown on your 2016 tax return, or
b. 100% of the tax shown on your 2015 return. Your 2015 tax return must cover all 12 months. (source: IRS.gov)
You can pay all of your estimated tax by April 18, 2016, or in advance. We recommend our clients make estimated payments BEFORE taxes are due to make the payments smaller and easier on household budgets. This also reduces the amount of tax that may be due when filing if an unexpected item causes you to owe more tax.
Give us a call if you’re not sure if this applies to you. We are always available to help determine what is needed related to your income taxes based on your circumstances. Many people feel overwhelmed when it comes to tax rules and laws. Working with a tax professional can reduce this burden and also ensure tax payments are made correctly and on time. You can reach us at (913) 888-9100 to schedule an appointment.
