GIMME A TAX BREAK

It is that time again; to look for the estimated payment vouchers that you were given with your tax return.

The government expects us to pay our tax liability throughout the year and imposes a penalty for underpayment. The Failure to Pay Penalty is .5% per month with a maximum of 25%. You can avoid paying this penalty by paying 90% of your total 2011 tax liability or 100% of your 2010 tax liability, whichever is less. If your AGI is more than $150k, you must pay 110% of 2010 tax liability or 90% of 2011 tax liability, whichever is less.

Keep these dates in mind: IRS CALIFORNIA 4/18/11 4/18/11 6/15/11 6/15/11 9/15/11 1/17/12 1/17/12

The third payment date for California is not missing. A couple of years ago CA decided that they wanted their money early so they required that the September 15th payment be paid with the June 15th payment.

We have recently prepared returns for new clients that have not filed returns for past years. The “Failure to File” penalty can be hefty. This penalty is 5% per month with a maximum of 25% of the original amount of tax owed. If the taxes are not paid within 60 days of the due date then the minimum penalty is the lesser of $135 or 100% of the unpaid tax amount.

Tax planning tip: Prepay deductible items in the year in which you will have the highest income. For example: pay the 1/17/12 California estimated payment before 12/31/11. Pay medical bills with check or charge card by 12/31/11.

Best tip: Get a small refund. (We don’t want to over pay the government!) If you have a refund, apply it to the next tax year. This will help reduce a potential penalty.

Some of our clients have called our office because they anticipate a change in income for 2011. If you are in this situation, please call as soon as possible so you can avoid these penalties!

We are a full-service accounting firm and have a complete staff available year-round to answer all of your tax, accounting, estate, trust and financial planning questions.

Keep us in the loop! We look forward to hearing from you.

In the meantime, if you have a specific question or want a brief, no cost consultation, you may call Debbie or go to the website at www.yourcpa.net.