published June, 2016
If you owe estimated payments, the next one is due June 15th. Individuals and Entities both have the same deadline this quarter.
Do you owe them?
If you’re making money that doesn’t have withholding (something other than a W-2, for example), you probably will owe estimated payments for 2016.
How much do I owe?
It depends! For individuals, there is a de minimus exclusion of $1,000 for federal tax—if you owe less than $1,000 when we calculate your 2016 return, there is no late penalty—providing you’ve paid in what you owe sufficiently to cover your tax within this tolerance limit.
If you owe more than $1,000 federal tax on your 2016 return, then we look to the current year 2016, and the prior year 2015. If you’ve paid in 90% of the tax on your 2016 return in a timely manner (i.e. you made your payments evenly through the year), you’re OK. But we generally don’t know what you’re going to owe until the return is done, so…
We look to the prior year, 2015. If you’ve paid in 100% of the total tax you owed in 2015, you’re OK…unless your AGI was over $150,000 (less if you’re married filing separate). Then, you must pay in 110% of the 2015 amount due to avoid a penalty. So if you have a paycheck, but also get a K-1, you’ll need to make a payment on the K-1 part of your income, for example.
What if I owe and I don’t pay?
There’s a penalty, of course! For the IRS, the penalty is 3% annually, plus interest for an underpaid amount, calculated to the day they get the payment.
But I haven’t finished my 2015 return yet, how do I know what to pay?
Yep, that’s a problem. Accounting for any known changes in income, we usually opt to pay in for 2016 at least what you owed for 2014. Ask me if you need payment vouchers—we need to be sure the IRS credits the proper year for your payments. And let us finish the 2015 return!
Entities also owe something—there’s a minimum payment for California LLCs, California S Corporations, and California C Corporations. (Partnerships that are not LLCs don’t owe generally.) If you only owe the minimum FTB $800, the June 15th payment is $320.