Estimated Tax Payments

[Jalabee]

Hello.

I am self-employed and make quarterly tax payments to the IRS. I file jointly with my husband, whose taxes are withheld by his employer. With respect to my quarterly payments, I understand that if our total yearly payments are 100% of last year's tax liability, we are [generally] not subject to any underpayment penalty.

This assumes that my income will not vary significantly versus last year (which is true).

However, next year I will not be working for several months, and therefore my 2005 income will be less than my 2004 income. How do I adjust my anticipated 2005 quarterly payments without risking an underpayment penalty (since the total tax withholding will be less than the previous year)?

Thanks!

[abezon]

Refigure your 2004 taxes using the income you project for 2005 & use that tax liability as your guidline for how much to pay in 2005. Most tax prep software includes an estimated payment calculator that lets you set income, number of dependents, etc.