I would pay what you owe me nothing more. There is no penalty as long as you pay in what you owe
You pay estimated taxes for the income for that year. If you don’t expect to have the income you don’t pay the estimated tax.
I think if you had enough withholding tax to pay the amount of you 2015 federal income tax you will not get hit with the form 2210 underpayment penalty, but you will have to pay income tax on all of it.
To avoid penalty the GENERAL rule is that you must pay in the lesser of (i) 100% of prior years tax or (ii) 90% of the current year tax.
I had a similar year (actually a bit more).
I put 30% of every check aside for taxes. It ended up being less than that so I got to pocket the difference.
Why didn’t you save up? You knew the bite was coming.
Our accountant told us to make the 1040ES payments for 2017 at the same rate we normally do.
I don't think this would apply however if you know in advance you're gonna have another extraordinarily high income year.
You should pay a tax for making me feel sick over my salary. :)
Maybe progressive tax rate ain’t so bad... :)
Sorry — misread.
No you don’t. As I said, I just had a year like that.
As a new taxpayer (I suggest S-Corp) you will not be held to estimates or anything like that. DO get an EIN and accountant right now.
Just pay at the end of the year like normal. Also as I said, put money away for taxes.
Here’s my advice; seek income tax advice someplace besides an internet discussion forum.
Srsly.
Yes, but only if you have additional1099 “windfall” income in 2017. Estimate what it will be for 2017 and make 4 installments. The first is due basically now.
I’m assuming your “normal” income is standard W-2.
Pay what is owed now. If an estimated is required then do the estimation based on what you will make in 2017. But be careful if you underestimate they won’t like it
I’m not sure this is a “windfall”. A lottery win yes but, this is earned income and you might be able to “income average” over the previous years by going back and correcting the past returns to spread this out over multiple years. Hopefully this would reduce your tax bracket and your tax bill for this year.
I am not a tax attorney nor an accountant.
i’m not an expert but at one time looked into paying estimated quarterly taxes and it seemed to me like if one did that, and didn’t get the amounts right, the penalty was worse than not doing it at all.
Also, one of the clauses about withholding penalties stated that if one had withheld at least 90% of what one owed during the previous tax year, then no penalty would apply to the current year no matter what. i interpreted that to mean every other year could be a freebee withholding-wise and did actually take advantage of it.
You might want to look into the above.
A couple years back they selected my MIL's estate tax return for an audit, and the audit resulted in a reduction of the estate so they sent a check back for $125K in over-payment of the estate taxes. Then, they levied a fine for not paying the estimated taxes on the tax refund.
Your required to pay 90% of your actual 2017 tax. (The exception to not pay a penalty is 100% (or 110%)of 2016 tax, but this does not benefit you if you have lower income.
You can be penalized if you pay less.
Check out Form 2210. There are exceptions for annualized calculation.
What did your CPA tell you?
Griping or bragging?
LOL -- probably OK on a one-time windfall, because they can't expect you to anticipate such a thing. But if you look for another spike in the following year, you need to prepay, or there's a penalty.
Also, if you're on Soc Security/Medicare, you will get means-tested out of some of your SS check, as it will be used to pay for a larger chunk of your Medicare premium. Because, for one year, you were too rich.
You should consult a CPA. Not this buncha rightwing reprobates.
Do your best to estimate the actual amount of tax and pay that in quarterly. If you are short, you will only have to pay 3% to 4% of the underpayment on the average outstanding balance. So if you owe 10,000 and did not pay it in with estimates your average balance would be $5,000 and your penalty is $150 to $200.
Don’t sweat it.
However, some states have much larger penalty percentages and you might want to over estimate the amount due.