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2008 Tax Guide

Individual Tax Guide Information

According to existing Internal Revenue Service regulations, if you are a taxpayer who receives salaries and wages, you need to regulate your federal tax withholdings such that:

  • You will owe less than $1,000 in federal tax for 2008, after subtracting your withholdings and credits, and
  • You expect your 2008 withholdings and credits to be less than the smaller of:
    • 90% of the tax shown on your 2008 tax return, or
    • 100% of the tax shown on your 2007 tax return.  Your 2007 tax return must cover all 12 months.

If you do not meet these conditions, you MUST make estimated tax payments.

 

Estimated tax is the method used to pay tax on income that is not subject to withholding.  This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards.  You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

 

Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return.  If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty.  Generally, the IRS can figure this penalty for you.  The underpayment penalty, and the exceptions to it, are discussed in chapter 4 of IRS Publication 505, Tax Withholding and Estimated Tax.

 

To avoid the possibility of a federal tax underpayment, employees should reassess their personal tax circumstances periodically throughout the tax year.  This may be accomplished in a variety of ways such as:

  • reviewing existing publications and form instructions as they are published by the Internal Revenue Service.  (Major publications are not automatically updated each January 1.)
  • recomputing last year's tax return, but substituting current-year withholding rates and tax collections.  (The 2008 tax returns are not finalized.)

 

Information which might be of benefit to you:

 

 

 

 

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