Estimated Tax Rules Change After Many Years

Do you know that the federal estimated tax rules have been changed for the first time in more than 55 years? For those of us who do not have W-2 jobs where our income taxes are withheld from our wages, we must pay our income taxes through estimated tax payments that are made kind of quarterly- that is, April 15th, June 15th, September 15th and January 15th of the following year.

For many years taxpayers were required to pay 25 % of the tax they expected to owe each quarter, subject to exceptions. Beginning in 2009 our estimated tax is due in the following amounts: April 15th- 30 %, June 15th- 30 %, September 15th- 20 % and January 15th- 20 %.

Don't Forget The Exceptions to Avoid Penalties

Don't forget- you can avoid the penalty for underpayment of estimated tax by paying 100 to 110 % of prior years tax. Use this option when your income tax liability is increasing from one year to the next. If your 2008 income is down and you expect your 2008 tax liability to be les sthan 2009, just make estimated tax payments equal to the 2008 tax on time in the required installments as shown above and you will avoid any underpayment of estimated tax penalty for 2009.