How to Avoid Estimated Tax Penalties

1. How to Avoid Estimated Tax Penalties www.etservicesva.com

2. Estimated tax penalty usually applies when a taxpayer pays too little of their total tax during the year. Each year, around 10 million taxpayers face an estimated tax penalty. The average penalty was about $130 in 2015, but the IRS has seen the number of taxpayers assessed this penalty increase in recent years. www.etservicesva.com

3. With a little planning, taxpayers can avoid the penalty altogether. Here are few tips on how to avoid estimated tax penalties • Taxpayers can avoid the penalty by paying at least 90 percent of their total tax liability in the year, either through income-tax withholding or by making quarterly estimated tax payments. • 2. Taxpayers can consider increasing their tax withholding in 2017, especially if they had a large balance due when they filed their 2016 return earlier this year. www.etservicesva.com

4. 3. Taxpayers can in general increase their withholding by claiming fewer allowances on their withholding form. If that’s not sufficient, ask your employers or payers to withhold an additional flat dollar amount each pay period. • 4. Taxpayers who receive Social Security benefits, unemployment compensation and certain other government payments can also opt to have federal tax taken out by filling out Form W-4V and giving it to their payer www.etservicesva.com

5. 5. Taxpayers whose income is not subject to withholding should consider making quarterly estimated tax payments to the IRS during the year to avoid estimated tax penalty. Tips to Make Estimated Tax Payments • Use IRS Direct Pay or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS) to easily pay estimated tax payments. For information on other payment options, visit IRS.gov/payments. • Reference IRS Newswire www.etservicesva.com

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