PENSACOLAFLTAX.COM
  • Home
  • QuickBooks Accounting
    • Payroll Processing
    • Accounting
    • Bookkeeping
    • QuickBooks Services >
      • QuickBooks Set-up
      • QuickBooks Training
      • QuickBooks Tune-up
      • QuickBooks Hybrid Bookkeeping
    • CFO Services
    • Non-Profit Organizations
    • Security
  • Income Tax Services
    • Virtual Remote Tax Service
    • Business Tax
    • Personal Tax
    • IRS payments and Problem Resolution
  • Blog
  • Contact
  • New Business Formation
  • Q&A
  • Home
  • QuickBooks Accounting
    • Payroll Processing
    • Accounting
    • Bookkeeping
    • QuickBooks Services >
      • QuickBooks Set-up
      • QuickBooks Training
      • QuickBooks Tune-up
      • QuickBooks Hybrid Bookkeeping
    • CFO Services
    • Non-Profit Organizations
    • Security
  • Income Tax Services
    • Virtual Remote Tax Service
    • Business Tax
    • Personal Tax
    • IRS payments and Problem Resolution
  • Blog
  • Contact
  • New Business Formation
  • Q&A
Search by typing & pressing enter

YOUR CART

McVay Business Services - Accounting & Tax Services Pensacola, FL

4/16/2019

In a good economy estimated tax payments are key

Picture
​It is not a major disaster if you owed some money when you filed your return-after all, you would rather have the use of the funds for as long as possible. What you want to avoid is having to pay the IRS a penalty for underpaying your taxes during the year. If you owe the estimated tax underpayment penalty, which is nondeductible, you are, in effect, paying the IRS interest for part of the money you should have prepaid during the year for taxes but did not.

On the other hand, if you received a large refund on last year's return, you made an interest-free loan to the government which is something you may want to avoid this year. If that happened, you should consider reducing the amount of withholding taken from your salary and/or the amount of estimated tax payments you make.

Here are some pointers to keep you on even keel when it comes to estimated taxes.
Basic rules. There is no estimated tax underpayment penalty for the 2018 tax year if the total tax on your return reduced by withholding (but not by estimated tax payments) is less than $1,000. If the amount owed on an individual income tax return comes to $1,000 or more after subtracting withheld tax, the estimated tax underpayment penalty generally will not apply if your "required annual payment" (i.e., the amount that must be prepaid during the year in the form of withheld tax and estimated tax payments) equals at least the smaller of two amounts:
  • 90% of your tax bill for 2018, or
  • 100% of your tax bill for 2017.
For example, suppose your tax bill for 2017 was $12,000, and your tax bill for 2018 will come to $15,000 (90% of which is $13,500). In this case, you must prepay at least $12,000 of your tax bill during 2017 to avoid the underpayment penalty. On the other hand, if the tax you will owe for 2018 will only be $10,000, you will have to make timely estimated tax payment of only $9,000 for 2018 to avoid the penalty.

A tougher rule applies if your adjusted gross income for 2017 exceeded $150,000 ($75,000 for married persons filing a separate return). During 2018, to avoid the underpayment penalty, you must prepay the smaller of 90% of the tax for 2018, or110% of the tax for 2017.

The IRS can waive an underpayment penalty if you did not make the payment because of a casualty, disaster, or other unusual circumstance, and it would be inequitable to impose the penalty. The penalty also can be waived for reasonable cause during the first two years after you retire (after reaching age 62) or become disabled.

It is a pay-as-you-go system. In general, one-quarter of your required annual payment must be paid by April 15, 2019, June 15, 2019, September 15, 2019, and January 15, 2020. Tax withheld from your salary is treated as an estimated tax payment, and an equal part of withheld tax generally is treated as paid on each installment date.

You may be able to make smaller payments under the annualized income method, which is useful to people whose income flow is not uniform over the year, perhaps because of a seasonal business. You may also want to use the annualized income method if a significant portion of your income comes from capital gains on the sale of securities which you sell at various times during the year.

Time for a checkup. Although you now know what your 2018 tax bill came to, you probably do not quite know what your 2019 tax will be. While it cannot be predicted with absolute certainty, your accountant can project what your 2019 tax will be based on your financial picture thus far, as well as on events you anticipate will occur and transactions you anticipate finalizing in the balance of this year. It would be a good idea for you and your accountant to get together well in advance of the next estimated tax installment to see how your payments are tracking and make any necessary adjustments to your wage withholding and/or estimated tax payments. It is possible a review of your situation could determine you are withholding too much rather than too little.

You and your accountant should also review whether changes in your personal or financial situation require a change in estimated tax payments or withholding. Mike McVay, Tax Accountant offers quarterly check-up so you don't have year end surprises. 
​
Mike McVay, Accountant - 850-725-5696 Mike@MikeMcVay.com

    Mike McVay, Tax Accountant Blog
    Certified ​QuickBooks ProAdvisor & Licensed Tax Accountant Pensacola, FL

    Best Price
    ​No Compromise

    Picture

    Author

    Mike McVay, Accountant Experienced IRS Tax Resolution Specialist
    With over 20-years experience working with individuals, families & small business owners. McVay has long term knowledge in taxation to help with their income tax, I.R.S tax issues and businesses management.
    850-725-5696​
    Mike@MikeMcVay.com

    Book An Appointment

    Archives

    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    August 2015
    July 2015
    February 2015
    January 2015
    December 2014
    November 2014

    Categories

    All

 ©2021 this website and all of its sub domains are owned and operated by
​McVay Consulting Services Inc. dba McVay Business Services
All Rights Reserved · Privacy Policy in place.
Pensacola Tax Services,Payroll,Accounting & QuickBooks Services
Mike@MikeMcVay.com
​850-725-5696

5336 N. Blue Angel Parkway
Pensacola, FL 32526

Client Portal Login

Subscribe to our newsletter