Estimated Tax Penalty
You will have to pay estimated tax penalty
for underpayment of estimated tax. for not paying estimated
taxes, for late payment of estimated tax, and for not filing
estimated tax payment forms.
How much is the estimated tax penalty?
The estimated tax penalty is figured by the
IRS based on the estimated tax penalty rate. The estimated tax
penalty for underpayment of estimated tax for the 2007 tax year
is calculated for the number of days the underpayment of
estimated tax remains unpaid:
from April 15 to December 31 at an annual
underpayment of estimated tax rate of 8%
from January 1 (following year) to April 15 (of the
following year) at an annual underpayment of
estimated tax rate of 7%
When will I not have to pay estimated tax
In general you don't have to pay estimated
tax penalty if any of the rules below apply:
The total of your tax withholding and estimated tax
is at least 100% of your previous year's tax
liability AND you paid your estimated tax payments
ontime. (110% if your AGI was at least $150,000 or
if your AGI was at least $75,000 and you file
married filing separately.)
The tax balance due is no more than 10% of your
federal tax return AND you paid all the
estimated tax payments required on time. That
means, you can underpay your estimated taxes by 10%
and won't have to pay the estimated tax penalty.
Your total tax less withholding is less than $1000.
If you owe the IRS less than $1,000, you usually
won't be penalized for not paying estimated tax
You did not have any tax liability last year.
You did not have any taxes withhold and your
current tax for the year less household employment
taxes is less than $1,000.