It's deadline day for payers of estimated tax. The third installment of these four extra tax filings/payments each each year is due today, Sept. 15.
This third 1040-ES payment covers money you got but didn't pay withholding taxes on between June 1 and Aug. 31.
Those three months and today's third estimated tax deadline earn 3 the latest By the Numbers honor.
But there are other figures that come into account as you figure your estimated tax payments.
Amounts used to figure estimated tax: The biggie is your expected adjusted gross income, or AGI, for the year.
This includes any salary upon which taxes are withheld, as well as earnings that aren't subject to payroll withholding, such as investment income.
Next note the deductions, either itemized or standard, you plan to claim, as well as all your personal exemptions.
Don't forget to tally your credits, such as the child and additional child tax credits,the American Opportunity educational credit and the Earned Income Tax Credit (EITC).
Then take into account other taxes you might owe or have or will pay this year.
Many of us who file 1040-ES forms are self-employed. We've got to be sure to take the self-employment tax we owe into account.
Other taxes you might face, especially if you make a lot of money, include the Net Investment Income Tax (NIIT) or the Medicare tax surcharge.
Finally, look at your total tax bill from last year. This isn't the amount you ended up sending Uncle Sam with your 1040 or the refund you got back. It's line 61 of your 2013 Form 1040.
That figure is your total tax liability before you took into account payments via withholding or previous estimated tax payments, credits you claimed and any other payments you may have made to the Internal Revenue Service last year.
Sailing into estimated tax safe harbor: You can ensure you won't owe any penalties for underpayment of estimated taxes by sending Uncle Sam at least this 2013 amount for the 2014 tax year.
This safe harbor amount doesn't require that you send that full amount in just estimated taxes. It includes what you've already paid or will pay this year in withholding if you have income subject to that.
Also, this 100 percent payment of your prior year's tax liability applies only if your adjusted gross income for 2013 was $150,000 or less ($75,000 or less if your filing status is married filing separately).
If, however, you make over these amounts, your estimated tax safe harbor waters just got a bit choppier. For higher earners, the safe harbor estimated tax amount is 110 percent of your prior year's tax liability.
Paper or computer computations: Yep, there are a lot of calculations to be made to come up with your proper full estimated tax amount that most of us make via four equal payments each April 15, June 15, Sept. 15 and Jan. 15 of the next tax year.
The IRS worksheet in the 1040-ES package helps you out if you prefer pencil and paper.
If, however, you are like most taxpayers nowadays and use tax software, that computer program will you come up with the correct estimated tax amount for each filing period.
So if you haven't done so yet, get to figuring your estimated taxes and get your payments in on time. Like today!
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Jeremy Norton
It’s tax payment time. We need to calculate our estimated tax payments. Thanks for sharing this article. It really helps who doesn’t know how to calculate their taxes.