It's no fun paying a hefty tax bill when you file your annual return. But Uncle Sam doesn't want to wait that long for your cash. Estimated-tax rules say you must pay a certain amount of tax during the year. If you don't, you run the risk of an underpayment penalty on top of your regular tax bill. Fortunately, you can stop the bleeding with some minor band-aids. Following is the who, what, where and when of estimated taxes ... and how to avoid penalties.
Who must pay estimated tax?
Practically everyone. Assuming you had a tax liability the prior year, you must pay estimated federal tax if:
• You expect to owe $1,000 in tax for the current year (after subtracting withholding and credits); and
• You expect your withholding will be less than the smaller of these two numbers: (1) 90 percent of the tax to be shown on your current year's tax return or (2) 100 percent of the tax shown on your prior year's retu...(register to read more)