Why Pay Tax Estimates
Tax estimates can be an important tool for high-net-worth and ultra-high-net-worth families to plan and manage their finances. Estimating taxes can help families accurately budget for the upcoming year, project that they are not underpaying or overpaying taxes, and take advantage of any available tax credits or deductions that may be available. Additionally, paying estimated taxes can help families avoid costly penalties and interest fees from the IRS if their actual taxes due exceed the amount paid in.
When estimating taxes, families should use estimated income figures that reflect the family’s current financial situation and any anticipated changes in income over the year. This includes income from investments, rental property, business activities, self-employment activities, or other sources. Families should also consider expected deductions such as charitable contributions or mortgage interest payments.
Families should determine whether they will use the estimated tax form provided by each state government or choose to file with federal Form 1040-ES for federal income tax purposes. Depending on the state in which a family resides, quarterly estimated payments may be due at different times during the year and may be made using methods such as check or electronic funds transfer (EFT). Families who have multiple members with different sources of income should also be sure to make individual payments for each member’s separate taxable entities.
A qualified personal wealth advisor like Bridges Trust can help families navigate through these complexities and guide them toward sound financial planning strategies, along with working with their legal and/or tax professionals. By recognizing expected family income levels and sources of taxation throughout the year, Bridges Trust helps families better understand how much they should pay in estimated taxes based on anticipated expenses and liabilities. Moreover, we work with individuals to help develop custom tax plans built to suit their specific goals which include lifestyle planning; cash flow forecasting; estate & wealth transfer planning; philanthropic planning; tax avoidance strategies; retirement planning; investment management; risk management; succession planning; and more.
Overall, paying estimated taxes could allow high-net-worth and ultra-high-net-worth families to plan ahead financially, while avoiding penalties from the IRS for underpayment of taxes due. Working with a qualified personal wealth advisor allows families to work towards achieving their long-term goals while managing their current financial burden responsibly. As always, we recommend that our clients also work with their qualified legal and tax professionals.
