Understanding the 110% Rule

In 2018, the 110% rule was enacted to enable taxpayers the ability to avoid the underpayment penalty, and interest associated with it, if they make a payment BEFORE January 15th of either 110% or 100% of the prior year’s tax bill.

How the 110% Rule Works:

Those who are married and filing jointly— with an Adjusted Gross Income (AGI) of $150,000*— can make a payment of 110% of their previous year’s tax bill, or 100% of the current year’s tax bill. Or, $75,000 for those who are married and filing as separate taxpayers.

How the 100% Rule Works:

Taxpayers with an AGI below the $150,000 threshold should pay 100% of the previous year’s tax bill.

Page one, Line 11= AGI

Page two, Line 24= Total Tax

For your convenience, here’s an Estimated Tax Payment Calculator.

Know When Your Taxes are Due:

The Internal Revenue Service (IRS) mandates that you remit taxes as you receive income. If you are a wage earner with a W2, then the withholding system that began in 1943 still accounts for your regular and timely tax payments. If you earn monies on additional types of income, such as interest, dividends, capital gains, or through self-employment, then the IRS requires you pay estimated quarterly payments to ensure that monies earned are paid in a timely manner.

Quarterly Tax Payments Are Due:

April 15th, June 15th, September 15th and January 15th

In addition to marking these quarterly dates on your calendar, please also note that if you fail to pay by these dates, then you WILL be charged underpayment penalties.

As a boutique firm, we are dedicated to empowering you with financial and operational tools that will help your business evolve through expansion and beyond. And, understanding that growth requires strategic decisions and, subsequently, investments, we prioritize offering you comprehensive services in line with your business aspirations.

This is why we offer professional financial guidance in a Fractional Chief Financial Officer capacity. Also, being that we’ve collaborated with most of you on several aspects of your business (for several years), we’re uniquely positioned to provide you with more tailored insight and recommendations.

We’re partners who approach your goals with intention and consideration, so we’re excited to help you problem-solve, utilize data, and confidently make business decisions using the depth of our strategic analysis capabilities and breadth of our planning expertise and tools.

Specifically, our Fractional CFO expertise focuses on helping you connect your finances to your goals and, subsequently, more acutely monitor performance. We’ll help you create in-depth budgets and projections, and provide financial analysis and long-range planning tools that will afford you more insights and you look to expand or launch new ventures.

Interested in discussing how our Fractional CFO service can help further your goals, faster, then please email sonya@gsm.biz.

Like most states, Pennsylvania will begin its annual report requirement for domestic and foreign business filing associations beginning on January 1, 2025. And, New Jersey and more than 25 other states will continue their requirements annually, too.

And although the initial phase of your Beneficial Ownership Information (BOI) report has been completed if you’re a retainer client (state filings will soon be submitted), if you have renewed your driver’s license, you must provide us with its updated information immediately.

Remember, compliance is important. And while the CTA mandate is contested in some regions, the best way to be prepared is to file. To stay compliant, a BOI report must be updated when any beneficial ownership information changes, which includes the expiration of your government identification (driver’s license); closure, sale or relocation of an entity; and/or the redistribution of ownership. To reiterate, the goal of the CTA is to prevent fraud by increasing ownership transparency, which isn’t possible without annually reviewing and resubmitting the FinCEN form. Again, if you’re a retainer client, we’re already completing this work on your behalf.

So, if you’ve renewed your license, or experienced any changes as mentioned above, please contact Laura at 610-565-8050.

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January: Money Talks Monthly

Know When Your Taxes are Due:

Subscribe to GSM’s Newsletter, Money Talks Monthly.

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The GSM Advisory Group, LLC, is a full-service, boutique accounting and business planning firm that specializes in working with individuals, independent business owners, franchisees, corporations and non-profit organizations— from start-up through to succession.

The GSM Advisory Group LLC
11 Park Avenue, Swarthmore, Pennsylvania 19081

January: Money Talks Monthly

Know When Your Taxes are Due:

Subscribe to GSM’s Newsletter, Money Talks Monthly.

Related Newsletters

December: Money Talks Merrily

November: Money Talks Monthly

October: Money Talks Monthly

The GSM Advisory Group, LLC, is a full-service, boutique accounting and business planning firm that specializes in working with individuals, independent business owners, franchisees, corporations and non-profit organizations— from start-up through to succession.

The GSM Advisory Group LLC 11 Park Avenue, Swarthmore, Pennsylvania 19081

The GSM Advisory Group LLC
11 Park Avenue, Swarthmore, Pennsylvania 19081