Do I Need to Start Making Estimated Federal Income Tax Payments?
Income tax planning is 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, you may need to make estimated payments to avoid penalties for late payments and/or underpayments.
To help you guide you through an estimated payments analysis, we have created 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
- Underwithholding
Everyone’s situation is different and there are many factors that dictate what you need to do. Overall, the financial world is confusing. Hiring a certified financial planner, who is a fiduciary, can make things easy for you. This flowchart makes things simple as it details step by step what you need to look for on weather or not you need to make these payments.
As always, if you have any questions, feel free to contact our team. We’d love to discuss your goals and how we can help you reach them.
Our independent, fee-only financial advisors have your best interest in mind. Start today with a financial assessment.