It's time to start thinking about what you owe for 2016
As you finalize, file, and pay your 2015 federal income tax, you'll want to be thinking about how much you'll owe for 2016. Why? Because the mid-April filing due date for 2015 federal individual income tax returns is also the due date for the first estimated tax payment of 2016. If you're required to make estimated payments this year, missing the deadline could lead to penalties. Here's what to consider.
- Do you need to make estimates? If you operate your own business, or receive alimony, investment, or other income that's not subject to withholding, you may have to pay the tax due in installments. Each estimated tax installment is a partial prepayment of the total amount you expect to owe for 2016. You make the payment yourself, typically four times a year.
- How much do you need to pay? To avoid penalties, your estimated payments must equal 90% of your 2016 tax or 100% of the tax on your 2015 return (110% if your adjusted gross income was over $150,000).
There are exceptions to the general rule. For instance, say you anticipate the balance due on your 2016 federal individual income tax return will be less than $1,000 after subtracting withholding and credits. In this case, you can skip the estimated payments and remit the final balance with your return next April. Other exceptions may also apply, and state laws can differ from federal requirements. In addition, farmers and fishermen are subject to special rules.
Contact us for more information. We'll be happy to review the rules with you.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.