This is an update to a previous post about estimated payments. Stuff just keeps coming up!
One of the foundations of our tax system is that we pay tax on income as the income is earned. If you have a real job this requirement is covered by the withholding on your paycheck. But if you own your own business, or have primarily investment income, you may need to make estimated payments.
The basic rule for estimated payments it that you pay either 100% of the tax due the prior year, or 90% of the tax due in the current year. Payments are April 15, June 15, September 15 and January 15 (yeah, it doesn’t really make sense). So, based on the 100% rule, if you owed $5000 for 2023, your estimated payments for 2024 will be $1250, with the first one due on April 15, 2024.
Since we don’t know what your current year income will be when we do taxes in March and April our estimates are generated on the 100% rule. This is also called the “safe harbor”.
The nice thing about the 90%/100% rule is that it really does protect you if you have wild swings in income. If your income goes way up, you are only required to pay the same that you owed the prior year (you will owe at tax time). But if your income craters and you cannot make the 100% payments you will likely be ok to pay less.
SO! With all of this, we will prepare estimates and give you vouchers and a little page to keep track of payments. But if you want me to rework and redo estimates during the year there will be a charge.