Who Must Make Estimated Tax Payments?
You're probably asking yourself: "Do I have to make estimated
tax payments for 2015?" By answering "yes" or "no" to these three
questions, you'll have your answer.
- Do you expect to owe $1,000 or more for 2015, after subtracting
any income tax withholding and credits from your total tax? If the
answer is no, you are not required to pay estimated tax. If the answer
is yes, go on to the next question.
- Do you expect your income tax withholding and credits to be at
least 90 percent of the tax you'll owe for 2015? If the answer is
yes, you are not required to pay estimated tax. If the answer is
no, go on to the next question.
- Do you expect your income tax withholding and credits to be at
least 100 percent of the tax shown on your 2014 return? (If your
2014 adjusted gross income was more than $150,000, or more than $75,000
for marrieds filing separately, substitute 110 percent in the preceding
sentence). If the answer is yes, you are not required to pay estimated
tax. If the answer is no, you must make estimated tax payments.
The IRS treats tax payments that are made through payroll
withholding as being made evenly through the year, regardless of when
the withholding is actually done. If you or your spouse is receiving
a paycheck, you can avoid the need to make estimated tax payments
and retain the use of more money throughout the year, if you arrange
to have extra tax withheld from your paycheck during the last month
of the year.
You can do this by filing a revised Form W-4
with your employer (or your spouse's employer) during the last month
of the year. To avoid penalties, the extra withholding must be a
dollar amount that brings your total tax withholding for the year
up to the lesser of (a) 90 percent of the amount you expect to owe
in 2015, or (b) 100 percent of the amount you owed last year (110
percent for high-income taxpayers).
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Save Money A 0.9 percent Medicare tax is imposed on every taxpayer
who receives wages during any tax year in excess of $200,000 ($250,000
in the case of a joint return, $125,000 in the case of a married taxpayer
filing separately). A 3.8 percent net investment
income tax is also imposed on the net investment income of individuals,
estates and trusts if modified adjusted gross income (MAGI) is over
a specified threshold amount If your income is high enough to
be subject to these additional taxes, consider increasing the amount
of your estimated tax payments in order to avoid a penalty come tax
time. Your accountant or advisor should be able to help you decide
how much to pay. |
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Estimated tax for corporations. If your
business is operated as a corporation, the corporation must make estimated
tax payments if it expects its tax to be $500 or more for a tax year.
In addition, a corporation will generally be subject to an underpayment of tax penalty if the estimated
tax payments, required in installments, do not equal the lesser of
(1) 100 percent of the tax shown on the return for the preceding year,
or (2) 100 percent of the tax shown for the current year (the current
year tax may be determined on the basis of actual income or annualized
income).
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