Fourth Quarter Estimated Tax Payments Due

The final estimated tax payment for 2008 is due on Thursday, January 15th, 2009. To avoid the penalty for not paying enough estimated tax, it's best to pay in at least 90% of your 2008 tax liability or 100% of your 2007 tax liability, whichever of the two numbers are lower. Both estimated payments and withholding are combined to help you avoid this penalty.

You have the option of skipping the fourth estimated tax payment. The IRS will not assess the underpayment penalty if you file and pay your tax in full by January 31st.

Personally, I find it best to get a rough calculation of my 2008 tax liability by drafting out my tax return, then using that to figure out the least amount I need to pay by January 15th to avoid any penalty. This process also gives me an idea of how much I might need to pay by April 15th.

Related information:

• Where to Mail Estimated Tax Payments (IRS.gov)
• Electronic Federal Tax Payment System