Plan now to make your 4th quarter estimated tax payment.
Source: Hallmark Weekly Tax e-News
Reminder. 4th Quarter Estimated Taxes are Now Due
If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The fourth quarter due date is now here.
Normal due date: Tuesday, January 17, 2017
Remember you are required to withhold at least 90% of your current tax obligation or 100%* of last year’s federal tax obligation. A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment might be necessary. Here are some other things to consider:
Underpayment penalty. If you do not have proper tax withholdings during the year, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. While a quick payment at the end of the year may not help avoid the underpayment penalty, it can help reduce the amount of the penalty.
W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may wish to change your W-2 withholdings to address this problem in the future.
Self-employed. Remember to account for the need to pay your Social Security and Medicare taxes as well. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter to pay your estimated taxes.
* If your income is over $150,000 ($75,000 if married filing separate), you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty.