Why do I have Estimated Tax Payment Vouchers in my return?
What if I don't want to make my estimated tax payments?
Why is there an Estimated Tax Penalty on my return? OR Why am I getting a letter for an Estimated Tax Penalty?
We get asked these questions frequently, and the answers are explained below:
General Rule for Estimated Payments (IRS):
In most cases, you must pay estimated tax for the following tax year if both of the following apply:
- You expect to owe at least $1,000 in tax, after subtracting your withhholding and refundable credits.
- You expect your withholding and refundable credits to be less than the smaller of:
- 90% of the tax to be shown on your tax return (meaning the income tax calculated on your return for the upcoming tax year)
- 100% of the tax shown on your current year tax return. Your current year tax return must cover all 12 months
What all this means is that you should have paid in at least 90% of your income tax by January 15th of the year the return is originally due.
If you decide to NOT pay the esimates we have given you, please understand that when your return is filed, you will incur and Underpayment of Estimated Tax Penalty, the penalty is assessed daily and the rate is set by the IRS each quarter.
General Rules for Estimated Tax Payments (State of Louisiana):
Taxpayers must pay estimated tax payments to the Louisiana Department of Revenue if their esimated Louisiana income tax after credits and taxes withhold is expected to exceed $1,000 for single filers, and $2,000 for joint filers. If this is not done, a penalty will be assessed.
