Effective for tax years beginning in 2016, you will not be penalized for not making estimated tax payments unless your tax liability is greater than $200. There are two ways to avoid being penalized:
- When you file your annual tax return, calculate and pay the total you estimate you will owe for the next year, along with any balance due for the current year, or
- Pay by January 15 of the following year, an amount equal to 90% of your total tax liability for the prior year, or 100% of your prior year tax liability. (Your total tax liability for the prior year is not necessarily the balance you owed when you filed your tax return.) Please note: For individual taxpayers, beginning with tax year 2018 (returns filed in 2019), the final due date to pay your estimated taxes is January 15. This is a change in the law mandated by the State. For businesses, the deadline to pay estimated taxes is still December 15.
If you do one of these two things, you will not be subject to penalty or interest, provided your annual tax return is timely filed.