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Self employed
Thank you, @BeckyLeeH , this was helpful. I took a look at the link you sent and specifically read the following post:
Withholding is not the only consideration. However if estimated payments were not paid on time (April, June, September and January), then there can be a shortfall in any one of the quarters which will create the underpayment penalty. This can occur even if you have a refund and even if you, in total, meet the 100% or 110% depending on income (prior year tax liability) or 90% of the current year tax or $1,000 total tax due.
The IRS system is 'pay as you go' meaning when the taxable income occurs, they want the tax at that time and not at the end of the year.
I understand this to mean that there can be a penalty if you don't make payments in the quarter that income is received? So, it doesn't matter if we're on track to overpay for the year in the past 2 quarters of estimated tax payments, we'd still need to make a payment in this quarter. If this is a correct assumption, could I decrease the estimated tax payment amount so we're not having to pay as much so there's a payment recorded to avoid the tax underpayment for this quarter?