- September 7, 2018
- Posted by: admin
- Category: IRS, Tax, Tax Responsibility
Estimated Tax Responsibilities
If you expect to owe at least $1,000 in taxes after subtracting your withholdings and refundable credits for a year, you are required to make estimated tax payments. The IRS may hit you with underpayment penalty if you fail to pay enough tax, through either withholding or estimated tax payment.
What is required to avoid underpayment penalties?
In order to avoid an underpayment penalty, you have to pay either 90% of your tax liability for the current year or 100% of the tax shown on the previous year’s return, whichever is lesser.
The requirement is a bit different for certain high-wage people. If your adjusted gross income for the previous year was over $150,000 (over $75,000 if you are married filing separately), you should pay the lesser of either 90% of your tax liability for the current year or 110% of the tax shown on the previous year’s return.