Video instructions and help with filling out and completing How Form 2220 Taxable

Instructions and Help about How Form 2220 Taxable

My name is Keith Hall welcome to another nasc minute today I want to talk about estimated tax payments the question is do you really have to make those quarterly estimated tax payments well you may be surprised but know you're not required to no one's gonna call you no one's gonna send you a reminder email you don't get a bill from the IRS so you don't really have to now I say that tongue-in-cheek because if you don't make those payments it's gonna cost you so really the question is how much should those payments be certainly make them but always make as little as possible to avoid any underpayment penalties so don't give your money to the IRS any faster than you have to but certainly don't incur any penalties so the IRS has three safe harbors that you can go by and avoid any penalties the first one is if you pay in at least a hundred percent of your tax from last year you'll have no penalties and no interest second if you pay in at least 90% of what you end up owing you'll have no penalties and interest so it's kinda like just getting close the IRS knows it's an estimate so if you get close that's okay and last if you end up owing less than a thousand dollars then you'll have no penalties also kind of a get close now that first method paying in exactly what you had last year is the easiest you've got last year's tax return you know exactly the total tax that you paid not the amount you had to write a check for with the total tax on your tax return divide that by four and that's your quarterly payment amount the second option a little more difficult because you don't know what those numbers are going to be net so take out a piece of paper a pencil do a little bit of math and estimate what your taxes are gonna be for the coming year once you get that total divide by four and now you have an estimated total so you have two options there one the first one should be used in years that you expect your earnings to increase so you don't want to pay money in faster than you have to but you want to avoid tee's the second option is for years that you expect your earnings to be lower because you don't want to pay in more tax than you have to so use that second method if you expect your earnings to be somewhat lower so again make sure you do consider making those quarterly payments you don't want to borrow money from the IRS so figure out the least amount possible and make those payments and always remember you're not alone you