No one wants to be charged an underpayment penalty. So, how can you be sure that the quarterly estimated payments you’re making are sufficient to cover your tax liability?

If a taxpayer’s quarterly estimated tax payments equal at least 90% of their tax liability for 2013, the underpayment penalty will generally not apply. An alternative way to determine a taxpayer’s estimated taxes for 2013, would be to take a look at the tax liability from 2012.

There are two ways to utilize this method:

1. Pay 100% of the tax shown on the taxpayer’s 2012 return if the adjusted gross income (AGI) was less than $150,000 ($75,000 if married filing separately); or
2. Pay 110% of the tax shown on the taxpayer’s 2012 return if the AGI was $150,000 or more ($75,000 if married filing separately).

What we highly recommend is taking the time now to review your current tax situation. A mid-year tax projection gives a more concise picture of where the taxpayer stands with not only their tax liability, but may shed some light on ways for the taxpayer to decrease their overall taxes for the year.

Do you have questions about making estimated payments or your current tax situation? Contact us and we’d be happy to offer our guidance and services to help ease your mind.

Lisa Osborne
Office Administration
lisaosborne@mo-cpa.com