The tax filing deadline is upon us. The sense of relief that another 1040 form is filed is like lifting a weight from your shoulders. But wait! April 15th is also the 1st quarter estimated tax due date! So how do you know if you need to place another check in the mail? Here are triggers that suggest you may wish to consider sending in a quarterly estimated tax payment.
- You needed to file quarterly estimated tax payments last year or your current tax return requires an additional tax payment in excess of $1,000.
- You receive income that does not have taxes withheld. Common sources of this type of income are Social Security Benefits, part-time jobs, and self-employment income.
- You have rental property, investment income, or interest income. In this case you may wish to consider calculating your estimated tax obligation for next year to determine if estimated tax payments are required.
- New tax changes could impact your tax bill. If you and your spouse both work, the marriage penalty and additional taxes for middle and upper income households could impact the amount owed next year. Substantial tax increases typically will start to escalate after your household income reaches $200,000.
- Any life events in your near future? Remember certain events such as marriage, divorce, or the birth of a child can change your tax obligation up or down. Perhaps you expect earnings from a small business or investment to impact your taxable income during the year.
If you think you might owe estimated taxes remember to make payments each quarter by the 15th (or the following Monday if it falls on a weekend) during the months of April, June, September, and January. You are required to prepay 90% of next tax year's bill or 100% of the prior year tax bill (110% if your adjusted gross income is over $150,000) to avoid underpayment penalties. If you do not, penalties for underpayment may apply to you in addition to the tax surprise facing you next April.