The second quarter for estimated tax purposes actually is a bit of a misnomer. The “quarter” consists of taxes for the months of April and May alone, and these taxes must be paid by June 15. Because of this shortened period, a reminder for AMT estimated tax payers is important. Repeated below is what we said in our article on the first quarter’s estimate, which applies as equally here.
It is pretty common knowledge that we are required to pay our taxes as we earn our income. For employees, you do this through withholdings from your paycheck, and for self-employed folks this is done by making quarterly estimated tax payments. But what about the AMT?
Not-so-common knowledge is that the AMT also must be paid throughout the year; if you wait until April 15 to pay it you could be subject to underpayment penalties. For employees, the problem is that the withholding tables your employer uses do not include any estimate for the AMT. If you want this withheld, you have to make the computation yourself and request that an additional amount be withheld from your paycheck. For self-employed people, your quarterly estimates similarly need to be increased by the expected AMT liability.
Great, you say, but how do you know whether you will be in the AMT, and, if you are, how much you will owe? Some folks use the “same as last year” approach, but this is inexact and carries the underpayment risk. The only way really to do it is to forecast your income and expenses for the year and then do an AMT calculation based on this forecast. This, of course, is quite an exercise unless you have both a resource for the technical tax rules on the AMT and access to software to make the calculations.