What are Estimated Tax Penalties and 
How Can I Avoid Them?

Individuals who are self-employed will be all too familiar with estimated tax penalties which may crop up in the instance that you have under-payed your tax obligation. The good news is that, in most cases, these estimated tax penalties can be easily avoided, even if you have severely underestimated the amount of money that you owe the IRS. Here is what you need to know.

avoid estimated tax penalties

How to avoid estimated tax and under-payment penalties

There are a handful of different ways to avoid having to pay any estimated tax and under-payment penalties. They are as follows:

You can avoid estimated tax penalties if you can prove that you were unable to make the required payment due to an extenuating circumstance over which you had no control. This circumstance could have been a “casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty”, according to the IRS.

You can avoid estimated tax penalties if you owe less than $1,000.

You can avoid estimated tax penalties as long as you pay a minimum of 90% of your tax obligation.

You can avoid estimated tax penalties if you pay at least 100% of the tax owed in the prior year.

You can avoid estimated tax penalties if you became disabled during the course of the current tax year or during the tax year before for which you should have made estimated payments.

Ultimately, the easiest way in which to avoid incurring estimated tax or under-payment penalties is to ensure that you make accurate estimated payments. While it is impossible to predict exactly what you will owe, it is possible to get a closer estimate. A good rule of thumb is to examine what you owed in tax payments in the previous tax year and make four equal payments which total at least 10% more than that amount.

Need help with your estimated payments or with filing your taxes? The CPA specialists at Georgen Scarborough Associates, PC are here to assist. Contact us today for further information regarding our services.

File Your Taxes on Time with These Tax Tips

The official tax deadline for the 2019 tax year has been announced and falls on Wednesday, the 15th of July 2020. Worried about being able to file your taxes on time and incurring hefty penalties as a result of not filing on time? Here are some tips to help you get organized.

tax filing tips

Keep your forms in one place

The leading reason why individuals file their taxes after the deadline is the fact that they have struggled to get all of the necessary information, documents, and forms in order. If all of those important forms and documents are strewn in different directions around the home or office, it can prove nearly impossible to gather them all. As such, strive to keep them all in one place right from the very start. That goes for your paperwork for deductible expenses, your W-2s, 1099s etc.

Set aside some time

Set aside a quiet time to prepare your tax documentation when you know that you will not be disturbed or rushed. It is important that you focus on what you are doing and that you double check all information.

Do your research

Most people are well aware of the basic tax deductions – but how sure are you that you do
not qualify for some of the lesser-known ones, such as the Self-Employed Health Insurance tax deduction (SEHI) or the student loan interest deduction? Do your research on all of the available tax deductions, especially above-the-line deductions, which are the ones that are often forgotten about or overlooked.

Enlist the help of a CPA

A CPA, or Certified Public Accountant, can take the stress and burden of doing taxes off of your shoulders completely. They will have all of the necessary knowledge and expertise in order to ensure that you receive the maximum benefit from your tax return and that you submit all of the necessary documents well within the time limit.

Contact the CPA specialists at Georgen Scarborough Associates, PC today for more details on how we can help you file your taxes.