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by Roger Chartier


Pub 505

Tax Withholding and Estimated Tax

Our dear federal tax is to be paid during the year as you are earning money. There are two ways to pay.

One is Withholding.

If you work for an employer, he/she most likely takes tax payments from your check before you get paid.

Commissions, pensions, bonuses, as well as gambling winnings are also subject to a tax being withheld by the payer.

Commissions, pensions, bonuses, as well as gambling winnings are also subject to a tax being withheld by the payer.

Another is Estimated Tax

If you don't take out enough tax for withholding, then you will have to pay more. Also if you are in business for yourself, as an example, you have to pay the estimated tax.

 

 

 

 

Estimated tax covers income from sources other that work such as royalties, capital gains, rent, interest, and dividends.

This estimated tax also is used to cover self-employment tax, as well as the alternative minimum tax.

There are a lot of changes this year on the form. You should read it first before taking action as the changes are most likely to affect at least one of your issues.

The Publication 505 explains the details of both methods of tax payment.

It covers how you can take credit where it is due to you

For your excessive pre-paid tax and for an overpayment of tax. That is the good news but...

Download the Publication 505 here.

Did you pay enough tax this year?

For those who did not pay enough tax during the year through either method, there are penalties and our friends at the IRS will help you by figuring the amount that you would have to pay.

There are exceptions to the underpayment penalty and it is covered on the publication.

There are more issues covered on the
IRS Publication 505

  1. Non resident aliens

  2. What is new for the year

  3. Your comments and suggestions

  4. Any new additional taxes

  5. Any new expenses that they are discussing

  6. Medical and dental expense changes

  7. Possible personal exemptions for some

  8. Foreign earned income issues

  9. Social Security (FICA) Tax

  10. Military retirees Issues

  11. Farm workers

  12. And many more issues not to be missed.
    Download the IRS Publication 505 now and read for yourself.