Also, I believe you can give tax free gifts of up to $10,000 per person (in USA). So if you have any dependents (each child, elderly parent, whatever), and you are in a position to do so...
sure...it will be tax free....from gift tax.. http://www.irs.gov/businesses/small/article/0,,id=108139,00.html
Do you have a source for that? I find it hard to believe that the irs would ever discourage you from giving them more money, but anything's possible when dealing with the government.
I don't believe that's right. You may be "penalized" in the sense that deductions you took previously based on your overpayment amounts may be prohibited in your tax calculations. Also, you will be giving the government access to your money interest free. Other than that I don't think there is a penalty in the normal sense of the word.
I don't know if it still happens, but I had a colleague years ago who did pay his estimated taxes in advance for a couple of quarters. Took him years to disentangle himself from paying penalties. The professor is likely correct.
That doesn't add up. For anyone claiming that the government will penalize you for paying *too much* estimated tax, please provide some sort of proof/source.
I have no other source. When we pay, I make sure we pay what we owe and only that; no advances, in part because of this person's experience. Not something I would want to try fooling around with. I've got enough troubles and hassles without adding this stuff to it.
It depends on the situation. Here in California, you will be penalized for NOT overpaying as mandated by a new state law. Due to the state budget crisis, starting in tax year 2009, quarterly payments have to be front end loaded to give California Government an interest free loan. Quarterly estimated payments are now 30%, 30%, 20%, 20% starting in 2009. The first 2 payments are in reality slightly overpaid, giving California the use of your money for free. (California is short of cash and needs the $$$ to continue its' wild spending spree...that's why this new law was passed.) Traders will generally use the annualized income installment method, so the quarterly results will vary. In addition, if any quarterly payment is over $20,000 you must make the payment electronically. Failure to do so results in an automatic 1% penalty...
as far as estimated taxes goes, i think, as long as you pay 90 or 100% of the PREVIOUS year taxes you are fine. for example if you earned 30K last year and paid 5K in taxes, you just pre-pay ~5K for 2009 tax year and IRS won't penalize you. you may own 70K on april 15, but are still allowed to pay only 5K before december 2009. google "safe harbor tax"
True but there's a caveat --- if your income exceeds a certain amount (I forgot the exact but around $150K), then you will actually have to pay 110% of previous tax