estimated tax vouchers for 2011
I filed 2010 Fed and State returns, the reports my tax consultant gave me has Fed and State estimated tax vouchers for 2011.
I'm employed, and most of the income is the salary, though there is a bit from rental property. In 2010 I sold some stock options and ESPP, hence I owe some money (>$2000) to IRS (which I paid with the return). Previous years, I got the refund, so tax withheld is more than what I owe.
My question is can I adjust my tax withholding at payroll (file a new W-4), and not pay IRS/State the estimated tax as per vouchers? Or is it mandatory to pay IRS/State as per vouchers.
As per my tax consultant, I can do more tax withhold at payroll and not pay estimated tax. Want to double check before I make that change and not send estimated tax to IRS/state.
As per IRS http://www.irs.gov/businesses/small/article/0, id=110413,00.html
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If you receive salaries and wages (TRUE IN MY CASE), you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. To do this, file a new Form W-4 (PDF) with your employer. There is a special line on Form W-4 for you to enter the additional amount you want your employer to withhold.
You do not have to pay estimated tax for the current year if you meet all three of the following conditions.
* You had no tax liability for the prior year (NOT TRUE IN MY CASE)
* You were a U.S. citizen or resident for the whole year (TRUE IN MY CASE)
* Your prior tax year covered a 12 month period (TRUE IN MY CASE)
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The above 2 paragraphs confused me a bit, the first para says I do not need to pay, and as with second paragraph I do not meet the first bullet point.
If making new W-4 to withhold more taxes at payroll work for IRS, does the same work for State of California as well? Please suggest.
Thanks in advance.
Comment on ebaines's post
Thanks ebaines for the explanation.
1. You mentioned "file quarterly statements" - are these 1040ES
2. Can I skip first 2 quarters of the year and file only 3rd or 4th quarter, I may have fair idea on the tax status by then.
Or perhaps in 3rd quarter, I can increase the amount of withholding since I know I will be in boarder line.
What is the possibility of paying penality wth the above options if I end up owing more than $1K for 2011?
Thanks for your advise.