If I got $1900 tax refund last year, and will owe $1500 this year, will I be charged underpayment penalty?

Question

Just wondering if I need to make an estimated payment to avoid underpayment penalty or will I be o.k since I got a $1900 refund last year (06) Please help! I don't understand the rule that says "90 % of current year, or 100% of previous year"

O.k, so how do I make the estimated tax payment? Where do I go?

Answer 1

First, you will need to look at your tax return from last year.

Here is how the rules work for the underpayment penalty:

If you total tax liability from last year was $5000, then you need to pay in at least $5000 to not be charged the underpayment penalty. 100% of previous year.

Or, if you expect your tax liability for this year to be $7000, then you need to pay in at least $6300 to not be charged the underpayment penalty. 90% of this year.

In any case, if you owe less than $1000, there is no penalty.

So, unless you you meet one of the 3 criteria above, you will owe the underpayment penalty.

Answer 2

It has nothing to do with your refund from last year. Look at your total tax liability for last year. If what you paid in this year is at least that much, then you're OK. But why not just make an estimated payment of $550 and get under the $1000 limit for penalties? You'll owe it anyway.

Answer 3

That's a huge swing. Unless you applied any of your refund from last year towards your taxes for this year then you should make estimated tax payments to avoid having to come up with so much in April. You might also want to adjust your withholdings so the next few paychecks have more taxes taken out. Next year, adjust your withholdings accordingly so you won't have this problem.

Answer 4

i'm undecided you already know in simple terms what a reimbursement is. throughout the year you've money withheld out of your paycheck for federal earnings tax. on the tip of the year, you prepare a form spoke of as a tax return to calculate how lots tax you owe finished for the year, and evaluate that to what replaced into withheld. in case you had greater withheld than your finished tax, you get the greater returned as a reimbursement. in case you probably did no longer have sufficient withheld, you may pay something fairly than getting a reimbursement. a reimbursement isn't some form of bonus the government provides for working. it particularly is like in case you went to WalMart and offered $sixteen well worth of things, yet gave the cashier a $20 bill. you will get a "refund" of $4, in spite of the shown fact that it particularly is no longer them providing you with some thing, it particularly is in simple terms getting your individual money returned. It seems such as you in simple terms did no longer have sufficient taken out. With claiming 2 allowances, you'll be especially close, yet could owe somewhat. the better earnings might finally end up with greater taken out, yet possibly no longer fairly sufficient.

Answer 5

Use form 1040-ES for your estimated tax payments.