Tax Withholding and Estimated Tax

A taxpayer must make estimated tax payments if the following conditions exist:

They will owe at least $1,000 after subtracting withholding and credits. Withholding and credits will be less than the smaller of one of the following: 1)90% of the tax to be shown on this year's tax return, or 2)100% of the tax shown on last year's tax return (110% if AGI more than $150,000).

What is Form 2210?

Underpayment of Estimated Tax by Individuals, Estates and Trusts

To find out your estimated tax liability, multiply your expected withholdings for the current year by 90% or 100% of the tax you withheld last year.

Whatever is lesser is then subtracted from your actual withholdings for the current year.

Unless a taxpayer has a high income, the penalty for underpaying estimated taxes for the tax year can be avoided if the taxpayer makes a payment ____

equal to or greater than 100% of the tax in the previous year or 90% of the taxes due for the current year

If your withholdings are greater than your tax liability, no _______ _______ payments are necessary.

estimated tax

The IRS may waive the penalty for failure to pay estimated taxes if the IRS determines that the taxpayer ____

retired after age 62 or became disabled and their underpayment was due to reasonable cause.

What is the penalty for filing a frivolous return?

$5,000

If taxes are paid late, the penalty is ___ of ____% of the unpaid amount for each month or part of a month the tax is not paid.

1/2 of 1%

To avoid penalties, the amount of tax payments must be __

100% of the prior years tax or 90% of the current years tax due, whichever is less

The due date for estimated taxes is typically the ___th of the month following the last month in the period.

15th

For estimated tax payment purposes, the period covering the 3 month period January 1 - March 31 is the __ quarter.

1st

A person should attach Form _____ to their tax return explaining why they were not able to make Estimated Tax Payments.

2210

For estimated tax payment purposes, the period covering the 3 month period April 1 - May 31 is the __ quarter.

2nd

For estimated tax payment purposes, the period covering the 3 month period June 1 - August 31 is the __ quarter.

3rd

The IRS expects our tax liability to be paid equally over _____ quarters

4

For estimated tax payment purposes, the period covering the 3 month period September 1 - December 31 is the __ quarter.

4th

If a return is filed late, a penalty of __% is compounded monthly on the balance due

5%

If a taxpayer withholds more than ____% of their expected tax liability for that year, _____

90%. No estimated tax liability exists.

What is a frivolous return?

A frivolous return is one that does not contain information needed to figure the correct tax or shows a substantially incorrect tax due to a frivolous position or desire to delay or interfere with the tax laws. This includes altering or striking out the preprinted language above the taxpayer's signature. Form 1040 Instructions.

The Failure to File and Failure to Pay penalties work in tandem,

FTF (5%) is reduced by the FTP (1/2). Effectively the taxpayer would pay 4.5% FTF and 1/2% FTP

Income from dividends, interest, capital gains, rent, royalties, and self-employment is __

NOT subject to withholding. A taxpayer with income from these sources must make estimated quarterly payments.

What is needed to complete an estimated payment voucher?

Name, address, social security number.

Only complete an estimated tax voucher if making a payment by ____

check or money order.

You do not have to pay estimated tax if you had no ____ _____ in the prior year.

tax liability. Also if you did not file a tax return the prior year.