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Level 2

I owe about 10k in Federal taxes this year. I also have a $3,750 electric car tax credit coming. Do you I need to pay at least 90% of the 10K to avoid penalty?

 
4 Replies
Level 20

I owe about 10k in Federal taxes this year. I also have a $3,750 electric car tax credit coming. Do you I need to pay at least 90% of the 10K to avoid penalty?

To avoid the penalty you must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:


- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

Level 2

I owe about 10k in Federal taxes this year. I also have a $3,750 electric car tax credit coming. Do you I need to pay at least 90% of the 10K to avoid penalty?

Thank you! 

 

To clarify, does "You expect your withholding and credits" indicate adding the Witholding amount to the Credit Amount. So if I paid 7000 in taxes, and my credit is 3750, this factor would equal 10,750. Thanks again. 

Level 20

I owe about 10k in Federal taxes this year. I also have a $3,750 electric car tax credit coming. Do you I need to pay at least 90% of the 10K to avoid penalty?

correct

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Level 19

I owe about 10k in Federal taxes this year. I also have a $3,750 electric car tax credit coming. Do you I need to pay at least 90% of the 10K to avoid penalty?

If you owe 10,000 in income tax, you must pay the entire amount by Tax Day to avoid penalty. 90% is not sufficient.