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Originally Posted by akamateo11 Thank you very much for your response.
Just to make sure I completely understand. Since I file joint returns with my wife and we received a refund last year I do not have to pay quarterly estimated tax this current year?
If by chance for example when we file returns for 2016 and if we end up owing tax due to my self employment income for 2016 then I will begin to make estimated quarterly estimated tax payments for 2017?
I would not be charged penalties for not filing estimated quarterly tax payments for 2016 returns (since we received refund 2015) only 2017 if I failed to make the estimated tax payments for the year of 2017?
I can assume no penalties would be assessed even if we ended up owing taxes for this year since it would be the first year that we incurred no refund and we received a refund the previous year. The penalties only incur when and if we file and end up owing taxes then the current year I would need to start paying the estimated tax quarterly payments.
Thanks again for your help! Even though your answers seemed clear I just want to make sure I fully understand. |
Just to make sure I completely understand. Since I file joint returns with my wife and we received a refund last year I do not have to pay quarterly estimated tax this current year? ======>>>>>>>>>>>>>>As said, aslongas you expect to owe less than $1k in taxes for the tax year of 2015after subtracting your federal income tax withholding from the total amount of tax you expect to owe this year,then, you don't need to make estimated tax payments;as you said, you do file a married filing joint return and you do end up receiving a refund with everything reported, you do not have to pay quarterly estimated taxes. It is OK for your spouse's withholding to pay the taxes on your self-employment.
If by chance for example when we file returns for 2016 and if we end up owing tax due to my self employment income for 2016 then I will begin to make estimated quarterly estimated tax payments for 2017? ==>>>>>>>>>>>>>>>Correct; as mentioned above. aslongas you expect to owe at least $1k in taxes for the tax year of 2016 after subtracting your federal income tax withholding from the total amount of tax you expect to owe this year, then yes you need to pay estimated taxes;however, in reality some self employers do not pay estimated taxes and pay a certain amt of penalties and interest when their taxable income is not that high.
I would not be charged penalties for not filing estimated quarterly tax payments for 2016 returns (since we received refund 2015) only 2017 if I failed to make the estimated tax payments for the year of 2017? =====> >>>>>>>>>>>>>>>as you have remitted more in tax than the amount owed the previous year, there are no penalties.
If however, you anticipate that you will owe funds, then you should go ahead and remit some amount to the IRS quarterly
I can assume no penalties would be assessed even if we ended up owing taxes for this year since it would be the first year that we incurred no refund and we received a refund the previous year.=============>>>>>>>>>>>>>>>>it depends; Aslongas your last year?s refund can cover all of your tax liability for this year; if not, you need topay estimated taxes to close the gap between this year?s tax liability and the last year?s refund. it is still possible to get a tax refund one year and pay a penalty for underpayment the next.
for example, assume that for 2015, you paid $10.5K in taxes during the year, and therefore, received a tax refund of $500. If your 2016 return is exactly the same as your 2015 return, you will again receive a $500 refund. However, if your tax liability rises to $15k and you only pay the same $10.5k in taxes during the year, not only will you owe $4.5k in taxes but you will also owe an underpayment penalty as you did not pay one of the following:
1. 90% of the 2016 tax liability of $15k or payments of $13,500.
2. 100% of the 2015 tax liability of $10k or payments of $10k
The penalties only incur when and if we file and end up owing taxes then the current year I would need to start paying the estimated tax quarterly payments.====> correct.Should your income get higher, you may want to consider filing quarterly estimates but at this point you appear to be safe.