Mastering Timely Payments: a Game-Changing Strategy to Sidestep Late Payment Penalties

– “Avoid Late Payment Penalties: Tips for Managing Your Federal Tax Withholdings”
– “The Safe Harbor Rule: How to Avoid Underpayment Penalties for Federal Taxes”

In summary:
– Many clients prefer to keep their federal tax withholdings low, but those with non-payroll income must make quarterly payments to the IRS to avoid underpayment penalties.
– The Safe Harbor Rule provides guidelines to avoid penalties, including withholding at least 90% of this year’s federal tax obligation or 100% of last year’s tax obligation. If needed, employees can increase their payroll withholdings later in the year to cover any shortfalls.