Income tax planning is critical to your clients’ financial success. Navigating our complicated federal pay-as-you go income tax system can be difficult. Adding further complexity, you must understand and adapt to changes in tax laws and in your clients’ personal circumstances. In each tax year, it is important to ensure that clients are properly paying their federal income tax liability in order to avoid penalties. Frequently, clients may need to make estimated payments to avoid penalties for late payments and/or underpayments.

To help you guide your clients through an estimated payments analysis, we have created this flowchart. The decision points identify factors that may trigger a need to make or increase estimated payments, including:

• Self-employment, rental, and investment income
• Unexpected increases in income
• Multiple sources of income
• Underwithholding

Updated For 10/15/2021