Equifax

Finance Blog

The Final Estimated Tax Payment for 2012

Written by Eva Rosenberg on January 10, 2013 in Tax  |   No comments

January 15 is the due date for the final payment on estimated 2012 IRS, state, and city income taxes. (You may have already paid the state in December to snag that extra deduction last year.) Generally, if you’re going to owe more than $1,000 to…

paying taxes January 15 is the due date for the final payment on estimated 2012 IRS, state, and city income taxes. (You may have already paid the state in December to snag that extra deduction last year.)

Generally, if you’re going to owe more than $1,000 to the IRS on April 15, you’re going to be on the hook for estimated tax (ES) payments. Another way to tell if you owe estimated taxes is if your withholding and refundable credits will be less than the smaller of:

a) 90 percent of the tax to be shown on your 2012 tax return
b) 100 percent of the tax shown on your 2011 tax return, covering 12 months

Who must make 2012 ES payments?

1) Self-employed folks (those who get a 1099) or partnerships with a business profit. Having no cash in the bank at the end of the year doesn’t mean you had no profit. This is a common error. You feel there’s no profit because there’s no money left—but you actually lived on the profits all year, paying rent or mortgage, insurance, and utilities; buying food; going to shows; and so on. (That’s what bookkeeping is for—to generate the numbers throughout the year.) When you have a profit throughout the year, not only do you face income taxes but you also face self-employment taxes, which are 13.3 percent of your business profits.

2) People living on investment income, including dividends, interest, partnership draws, and capital gains proceeds. Mutual funds post capital gains profits at the end of the year. While the income might be high, you may treat that income as having been earned in December. This means that your final estimated tax payment may be the highest amount. (There is a special computation on page 4 of Form 2210 to help you avoid late payment penalties when your income is not earned evenly all year.)

3) People who have been collecting unemployment income. Yes, this is definitely taxable for IRS purposes. Most states tax this income as well. This generally comes as a shock at tax time when the tax return shows a significant balance due that folks were not expecting. Avoid making estimated tax payments by having withholding taken out as you go along. Most people facing the huge income loss from unemployment don’t feel they can even live on those low payments, much less on the unemployment payments reduced by withholding. Sadly, though, taxes will be due.

4) People living on Social Security (SS) who also have other income. True, SS and SS disability income are not taxable if that’s the only income you receive. But when you also receive other income, it’s quite likely that up to 85 percent of your Social Security income will be taxed when you’re paying taxes.

What happens if you don’t make your estimated payments when they are due? No worries—if you don’t mind giving the IRS and your state a few extra bucks. You’ll just pay some penalties.

Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.

No comments yet


Leave a Comment


Name :


Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.


Tax Archive

Stay Informed Sign up for our FREE Equifax email Newsletter