Estimated Tax Payments: Do You Have to Pay?

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Most people get tax refunds from the government. But if you don't pay enough in tax upfront, then you can end up having to pay penalties for failing to make estimated tax payments. How can you figure out whether you should pay estimated taxes in 2014?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the basics of estimated tax payments and who should make them. Dan notes that to avoid penalties, you generally have to have 90% of your tax liability withheld through payroll withholding. If you don't, you'll need to make quarterly estimated tax payments in April, June, September, and January to make up the difference. Dan goes through a safe-harbor provision, though, that offers an alternative to making a guess about your current-year tax liability. Although the penalties aren't egregious, Dan concludes that they're unnecessary with a little planning.

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thank you for this explanation! you just helped me with a tax exam lol

MRM
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Great job. Thank you for sharing the information. I have quick question regarding having both w2 and self employee income. For quarterly tax estimation as long as the Federal tax on w2 is already paid, should I only calculate the estimate for self employee tax?

kevinitman
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Can anyone tell me if this is your first year start up, do we still have to make estimated payments? I see conflicting info on this...

pamelastansbury
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