2014 Estimated Tax – Sould I Pay It?
Depends on what type taxpayer you are.
Are you
Wanting to pay in the absolute minimum such that next April you may owe a bunch but with no penalty?
Or, are you wanting to pay in during the year such come next April 15th you are about even?
Example
In 2013 (most recent prior year) your TOTAL TAX (line 61 Form 1040) is $7,616. But, your 2014 is much higher and your total tax is projected to be $92,059. If you pay in $7,616 thru federal withholding on a W2, or make 4 estimated timely payments totaling $7,616, or some combination thereof, then you would owe the difference of $84,443 on April 15th and it would be penalty free! Why, because you meet one of the penalty exceptions based on prior year income and tax paid. This one says…. “your honor, I did not know what I was going to make so I paid in at least last year’s total tax”.
If you want to pay all of the $92,059 in the form of a W2 by year end, your employment taxes would be based on a significantly higher W2… your FICA (Social Security & Medicare) would be very high since your gross would be over $200,000.
If this additional income was earned in December, 2014, we can annualize the penalty computation (another exception) and get you out of the penalty but the balance would all be due by January 15, 2015.
Personally, I like the first part of the example but it is your choice… both are legal and without penalty.