Quote:
Originally Posted by Bill14564
While I agree with all the above (and it took me a while to get to that place) I'm not yet sure whether you need to pay estimated taxes based on 100% of your payment for last year or if you need to base it on 110% when your AGI is above a certain level. I use 110% just to be safe but that *might* not be necessary.
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That is why I said "usually". If your AGI is above a certain level, you do need to pay 110 percent of your prior year tax. But, if you use a tax software, like TurboTax, the program will calculate the correct amount for you. One year, this happened to me and I thought TurboTax had made a mistake. If you are under the AGI limit, I would not pay the extra amount in estimated tax. Let the tax software tell you how much to pay.
The other method, which I never use, is to pay at least 90 percent of the current year taxes due. This involves a complicated calculation and tracking of your income during the year. It's not worth it to me.
Also, if tax withholding is optional, I never allow someone else to deduct taxes from my income.