Discussion:Quarterly estimated payments
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Discussion Forum Index --> Tax Questions --> Quarterly estimated payments
| 16 November 2006 | |
| If the 1st quarterly is overpaid, i.e. payment is in excess of the required minimum, is the overpayment carried forward to the subsequent quarters so that the subsequent payments can be less than the required? Please help, thank you. | |
Death&Taxes (talk|edits) said: | 16 November 2006 |
| Yes, it is when the final numbers are known. | |
| 16 November 2006 | |
| Thank you, D&T, could you be more specific? What do you mean by when the final numbers are known? This is a client with AGI over $150k, I know his quarterly required payment is 25% of 110% of his 2005 tax liability. Through catch up w/h and the 1st quarter payment, he actually overpaid in the 1st quarter. I am hoping he can spread the overpayment and apply 1/3 to each of the next three quarters. Thanks again. | |
| 16 November 2006 | |
| When the final tax amount due per his return for 2006(tax planning or actual return is filed)you will know his actual liability. If you know from tax planning that he will not owe as much, then indeed the overpayments will be applied toward future payments. The ES vouchers are estimations....it may or may not be what is actually owed :) | |
| 16 November 2006 | |
| Thank you Sandysea. It does make sense. I should have mentioned that I am trying to payin the minimum so that there is no underpayment penalty. I understand he may still owe taxes upon filing his returns. Thanks again. | |
Death&Taxes (talk|edits) said: | 16 November 2006 |
| I simply meant that if for any reason tax were substantially less, 90% of the actual tax might be the requirement, not 110% of last years tax. Getting back to you, if 110% were $50,000, and he had paid $30,000 for the first quarter, he would have covered is first quarter requirement of 12,500, his second quarter of 12,500 and $5000 of his third quarter. I suppose you can apply it equally too. | |
| 17 November 2006 | |
| Sunny - Why don't you do a proforma form 2210 for the client? (Using the 2005 form will probably get you close enough). You will find that the underestimation penalty is based on a year-to-date calculation. For each quarter, the year-to-date tax liability is calculated, based on the lower of 90% of actual as prorated, or 90% of actual as annualized, or 100% (110% for taxpayers with higher prior year AGI) of the prior year's liablity. The resulting figure is compared to year-to-date payments and the penalty is calculated if there is a shortfall, based on the number of days the shortfall is outstanding.
Good luck! | |
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