Income tax planning can be critical to your financial success. Navigating our complicated federal pay-as-you go income tax system can be difficult. Adding further complexity, you must understand and adapt to changes in tax laws and in your personal circumstances. In each tax year, it is important to ensure that you are properly paying your federal income tax liability in order to avoid penalties. Frequently, individuals may need to make estimated payments to avoid penalties for late payments and/or underpayments.
To help guide you through an estimated payments analysis, we are offering this flowchart. The decision points identify factors that may trigger a need to make or increase estimated payments, including:
- Self-employment, rental, and investment income
- Unexpected increases in income
- Multiple sources of income
- Under withholding
As a reminder, the content of this article and flowchart does not constitute a tax opinion and we are not tax practitioners. Always consult with a competent professional service provider for advice on tax matters specific to your situation. If you are in need of an introduction to a provider, we would be happy to connect you to our accounting and CPA resources.