How to Avoid Estimated Tax Penalties

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How to Avoid Estimated Tax Penalties
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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.
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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.
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3. Taxpayers can in general increase their
withholding by claiming fewer allowances on their
withholding form. If thats 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
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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 Departments
  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

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