If you haven't done so already, calculate your third estimated tax payment for 2012. September 17th will sneak up on you faster than you expect, so it's best to have this taken care of early.
For most people, tax day comes just once a year - on April 15. But, for most entrepreneurs, Uncle Sam expects a check four times a year.
The rules are complex, but we will make this easy. You need to pay estimated taxes if:
- If you are an sole proprietor, partner or S corporation shareholder AND you expect to owe at least $1,000 in federal income taxes when you file your personal income tax return in April; or
- If your business is a C corporation AND you expect to owe at least $500 in federal income taxes when you file your annual corporate income tax return.
How much to pay.
The official answer is you must calculate your expected AGI, taxable income, taxes, deductions, and credits for the year, then use Form 1040-ES to figure your estimated tax.
How to pay.
If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.
K.R. Hoffman & Co., LLC, counsels Entrepreneurs, Professionals and Select Individuals in taking control of their taxes, and businesses. Discover how we can help you overcome your tax and business challenges. For more information or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday from 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.