Why You Don’t Want to Miss Your Estimated Tax Payments

July 22, 2019

By: Michelle Sierra, Staff Accountant, Osborne Rincon CPAs

Did you know that you could receive a penalty for not making payments quarterly to the Internal Revenue Service (IRS) or Franchise Tax Board (FTB)?

If you do not withhold enough on your W-2, you may be required to make estimated tax payments each quarter. If you receive other sources of income such as self-employed income, interest or pensions, you may also be underpaying your taxes.

The general rule requiring estimated tax payments to the IRS is as follows:

  1. If after subtracting your withholding and credits, you expect to owe at least $1,000 in tax for 2019, and;
  2. Your withholdings and credits are expected to be less than 90% of your tax shown on your 2019 return or 100% of the tax shown on your 2018 tax return.

California has different requirements. For the FTB, you should make estimated payments if you expect to owe at least $500 in tax for 2019 (after withholdings and credits) and your withholding and credits are to be less than the smaller of 90% tax shown for 2019 or 100% tax shown on your 2018 return.

California requires payments to be made electronically. If at any point your estimates or extension payments exceed $20,000 or your tax liability is over $80,000, a 1% penalty on tax owed will be assessed.

For more information, contact Osborne Rincon CPAs at (760) 777-9805.

Michelle Sierra is an Enrolled Agent and Staff Accountant II with Osborne Rincon CPAs, which is one of the oldest and most respected full-service accounting firms in the Coachella Valley. To learn more, call (760) 777-9805 or go to www.OsborneRincon.com.

Last modified: July 22, 2019

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