Life is full of surprises, or as you may have heard “Life is what happens to you while you are making plans”. But what if these life changes have an impact on your taxes and it’s in the middle of the year? Then what do you do?
Well, when it comes to taxes, you adjust accordingly. If you have reason to believe that your tax liability will be higher than it was in the prior year, then you can look at making estimated tax payments. Estimated tax payments are generally due on April 15th, June 15th, September 15th and January 15th (following the tax year of the liability). But what if something happens in July and you have not made an April 15th and a June 15th payment?
That’s fine. It’s never too late to start making estimated tax payments. The payment you make for September 15th can be the first one for the year. You can find the blank forms on IRS.gov and the instructions will let you know where to send the money.
Safe harbors are built into the tax system. It could be you end up with no penalty for underpayment if your tax withholdings are equal to a certain percentage – 100% of your prior year tax (unless you are in a higher tax bracket and it is 110%). If that’s the case don’t sweat making an estimated tax payment for the windfall stock you inherited from your grandmother and sold for a big gain. The tax may not be due until April 15th.
Just be aware, if you do wait to pay, don’t spend the money!
To be certain where you fall tax wise, consult your tax adviser. If you don’t have an advisor for your taxes and life changes, make another change and find yourself a good adviser – they may be able to turn life’s lemons into lemonade. For more information on how Henry+Horne can help provide that perfect tax advisor, check out our Accounting Services page.
Donna H. Laubscher, CPA