What I’m Working On
Estimating Tax Withholdings Is Crucial
Underpaying can result in penalties and owing taxes at filing time. The law in the United States
requires most employees and self-employed business owners to pay at least 90% of their taxes before
April or earlier. This topic became impactful in 2024 when the IRS raised the penalty interest rate
from 3% to 8%[1]. The IRS determines the tax underpayment penalty by calculating the amount based
on the total underpayment amount, the period when the underpayment occurred, and the interest rate
for the underpayments, starting on the due date taxes were owed. The interest rate is reset each
quarter. State and local governments apply their own penalty calculations as well.
Overpaying gives the IRS and your state and local government an interest-free loan throughout the
year. In fact, the IRS states that it has 45 days after it receives your tax return physically or
electronically before it starts owing you interest on your overpayment amount. The ideal scenario
is to withhold as close to your actual tax liability as possible.
[1] https://www.wsj.com/podcasts/your-money-matters/irs-more-tha….
Estimating Federal Income Tax Payments
Market Indices
Year-to-date, as of February 29, 2024
Stocks:
Large Cap S&P 500, +7.34%
Small Cap Russell 2000, +2.21%
Technology NASDAQ, +7.93% International MSCI EAFE, +2.88% Bonds:
U.S. Aggregate AGG, -1.37%
Sources: FactSet; Dow Jones Market Data; S&P Dow Jones Indices; ICE Data Services; Bloomberg
Indices; and
J.P. Morgan.
What I’ve Enjoyed
With my son Cole by my side, we embarked on a whirlwind college tour across the South, cramming
five schools into just four sun- drenched days. Immersed in Southern hospitality, we devoured
iconic dishes like crispy fried chicken and savory shrimp and grits. Cole gained valuable insights
into his ideal college environment, while I left yearning to matriculate and relive the college
experience
once again!
