Flowchart: Do I Need to Start Making Estimated Federal Income Tax Payments?

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.

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.  

Published for the blog on March 30, 2023 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.