Penalty

Forum|Forum|1 year ago
November 19, 2024
1 reply
9 views

Can I avoid tax penalty if I pay 110% of taxes I owed last year in withholdings and estimated taxes even if my tax obligation is much bigger this year? If I get a large profit in a K1, will that cause me a tax penalty since it will increase my tax liability by a lot?

Bsch4477

Level 15

Yes. Here are the rules.

https://www.irs.gov/pub/irs-pdf/f1040es.pdf

vikrant-kothariAuthor

Level 2

Thanks. A followup question on the rules posted. it says that I may still owe a penalty if estimated payment for one period is less than 25% of the amended estimated tax. I am not even sure what that means. If my K1 is coming next year, how can I count that in my estimation? And if I make huge money in December (say huge bonus) then the best I can do is to up my Estimated Taxes in Jan. But looks like that can also cause penalty for me?