Who Else Wants to Avoid Estimated Tax Penalties?

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You probably know April 15 is the date your tax return is due, but did you also know it is the date your first 2009 Estimated Tax Payment (ETP) is due. If you are self employed, then you need to pay 4 equal estimated tax payments based on your taxes for 2008. Here are 3 ways to be sure you do not get hit with the ETP penalty.

• Your total payments are less than $1000
• If you have paid at least 90% of the taxes due or
  
• 100% of your prior year taxes (whichever is smaller)

Although normally you need to make 4 equal payments, but if you make unequal payments because your earnings are unequal. you can annualize your income and file Form 2210 to see if you owe a penalty. This may avoid or reduce the penalties.

Pay your ETP by each of the following dates:

• April 15
• June 15
• September 15
• January 15 (of the following year)

Some people make the mistake of thinking they are due after the end of the quarter like payroll taxes, but that is not true, they are due as listed above. Be sure your payments are marked as an ETP and what year you are paying for. You can print coupons to mail in with your checks on www.irs.gov.

You may be able to get the penalties waived if your failure to pay was due to natural disater or other casualty or if you retired (after turning 62) or became disable during the year and your lack of paying was not due to wilful neglect.

If you have additional questions see IRS Publication 505 or contact a tax professional.