Monday 9/16 is deadline for 3rd installment of estimated taxes. Question for anyone who knows...if my prior payments total in excess of 100% of prior year taxes, (in my case, I have already paid 125% of last year's numbers) am I still required to make a payment this Monday? This is my first year of my income coming 100% from trading so I don't have any withholding to offset these required payments. IRS Rules state: If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. (http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes) I made the April 15 and June 15 payment which, as mentioned, puts me above that 100% of last year's taxes and haven't made any additional payments since. My interpretation of the above rule was that I didn't need to make any additional payments but now I am not sure. I'd really hate to have to deplete my capital to pay this if it is not necessary. Can anyone offer a little guidance? (too late to ask accountant/tax professional since Mon is cut-off date.) Thx
I believe that is correct. You can pay more than the minimum, and you can pay it sooner than required. But if you pay less or pay late, you'll likely get hit with a penalty. If you're just a few days late, sometimes they don't notice.
There's no penalty if you have already paid 100% of last years taxes or 110% if your income is over 150k.