The third installment of federal estimated income taxes for 2013 is due on September 16. Now is a good time to assess where you stand from a tax perspective to this point in the year and adjust the September 2013 and the January 2014 estimated tax payments accordingly.
Have you had any significant transactions since you previously figured your estimated taxes for 2013? Maybe you sold a piece of property at a sizeable gain? Maybe you took a significant loss?
Review the sales that you’ve actualized. Project what you think you may do between now and the end of the year with your investments. Make an estimate of how your actions to date and in the months to come will impact your tax bill.
In making your estimates, take into account new rules that could raise your tax bill if you are considered to be a high-income taxpayer:
If you want to play it safe and avoid underpayment penalties, peg your estimated tax payments for the year according to your tax bill in 2012. As long as you pay at least the same amount in 2013 estimated taxes (110% if your adjusted gross income in 2012 was more than $150,000, or $75,000 if married filing separately), you won’t owe any penalty, regardless of your ultimate tax bill.
If you (or your spouse) have a job, you can avoid paying estimated taxes by increasing withholding from your pay to cover your estimated tax liability. You have two options:
If you live in a state with an income tax, you probably have an estimated tax responsibility for state income taxes. Check the minimum payments and filing deadlines.
Certainly, you want to pay enough estimated taxes to avoid penalties. But there is also a practical reason to do this. If you fail to pay estimated taxes, you may not have the cash available to pay what’s owed when you file your 2013 tax return. This can put you in a financial crunch. Talk with a tax advisor to make sure you’re meeting your estimated tax responsibilities.
Tax Refunds Abound
About 110.9 million refunds were issued to individuals for the 2010 tax year (the most recent year for statistics). The average refund was $2,953. The total amount of refunds was $327.4 billion.
Source: Office of the National Taxpayer AdvocateView all factoids