How do I deal with estimated income taxes to avoid penalties?
I'm David Stonehill, an Ohio licensed attorney for over 35 years. I represent clients with all sorts of financial and tax matters. An avoidable, but all too frequent, problem stems from the failure to pay estimated income taxes.
This problem is so pervasive that I've decided to focus just on this issue: The right way to deal with your estimated income taxes. If you are receiving alimony, or are self-employed, or are receiving significant income from some source that does not withhold taxes, then you have to deal with timely paying estimated income taxes. If you do not, the IRS and other taxing authorities will assess a penalty against you.
Failing to set aside estimated income taxes, and ignoring the quarterly filing requirement, can cause all sorts of problems down the road. For example, if you do not set aside that portion of your income for payment of taxes, you might not have enough to pay what you owe at the end of the year. Then, you could be liable for failure to pay penalties, in addition to underpayment of estimated income tax penalties and interest. I call this the "cascade effect."
To deal with this successfully, you need to determine accurately what taxes you will owe in the current tax year, and prepare and file the quarterly vouchers with payment for the amount you owe. I know that this is easier said than done.
Look, if you need help, call me at (513) 739-7899. As an attorney, I keep everything confidential. Or, email me at email@example.com (anti-SPAM). I'll tell you how I would handle your matter professionally, but there is no obligation to engage my services. Referrals are always appreciated and welcomed.