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Estimated IRS Taxes

The annual deadline to file an income tax return is also the deadline to pay the balance of the total amount of taxes due for the year. Find out more about how to estimate your IRS tax payments here at Tax Champions. 

Who is required to pay Estimated Taxes?

Employers are required by law to withhold income and other taxes from their employees’ paychecks. Employees submit a W-4 tax form to their employer, which informs them how much to withhold. If the employee doesn’t have enough withheld from their paychecks, they should send additional payments to the IRS.  Taxpayers who are self-employed and anticipate owing more than $1,000 for the year must make estimated tax payments, as none are withheld for them.

Corporations are also required to make estimated tax payments if they anticipate owing more than $500 for the year. The IRS points out that you don’t have to make estimated tax payments during the year if you’re a U.S. citizen or lived in the country throughout the year and owed no taxes the previous year. This only applies if your previous tax year duration was 12 months.

How to Determine the Appropriate Estimated Taxes

Determining how much tax to pay during the year relies on a reasonably anticipated adjusted gross income, along with the anticipated taxable income, tax liability, deductions, and credits for the end of the current year. It may be helpful to refer to the income tax return you filed the previous year for this information.

The IRS understands that anticipating income is essentially predicting the future, which is relatively difficult for most taxpayers. If your estimations prove to be inaccurate as the year progresses, recalculate your estimated taxes and inform the IRS of the updated calculations. Diligence in estimated tax payment calculations is critical to avoid costly penalties.

When calculating estimated tax payments, remember to carefully consider significant changes within your business, as well as any changes or updates in the current tax law.

Unpayment of Estimated Tax Penalty

If the estimated tax payments submitted to the IRS during the year are too low, you may be subject to a monetary penalty if you owe $1,000 or more when the return is filed. The penalty may be avoided if at least 90 percent of the total due was paid or the total amount of the estimated payments sent in was equal to or greater than the total tax liability of the previous year.

Other rules apply for farmers and fishermen. If income is irregular throughout the year, you may be able to avoid or lower the penalty by making unequal payments. If you retired after age 62, you became disabled during the current or previous year and were unable to make the payments, or you were unable to make the payments because of an extraordinary event, such as a stay in the hospital, the IRS may also consider waiving the penalty.

When to Make Estimated Tax Payments

The IRS accepts estimated tax payments by mail or phone, as well as through an online portal and should be made four times per year. The Electronic Federal Tax Payment System gives taxpayers access to an easy payment process that is appropriate for all other federal taxes in addition to estimated tax payments. Estimated tax payments are due on April 15 for income received between January 1 and March 31.

For the time period of April 1 through May 31, payments must be received by June 15. September 15 is the due date for income received between June 1 and August 31. Taxpayers have until January 15 of the following year to send estimated tax payments for income received between September 1 and December 31.

Do You Need Help With Estimated Tax Payments?

Accurately calculating and submitting timely estimated tax payments is a critical component of a taxpayer’s obligation. Consider hiring a professional tax representative to determine how much your estimated tax payments should be.

Tax professionals have their finger on the pulse of ever-changing tax law and have a unique ability to calculate estimated taxes with a wide variety of financial circumstances at the appropriate tax rate for your income bracket. At Tax Champions, we have over 35 years of experience with the ever-changing tax code and IRS procedures.

Our credentialed staff is committed to your financial well-being and strive to meet and exceed our clients’ expectations every day. Contact us today for a free, no-obligation consultation to see if our services are a good fit for your needs. Our staff is available at 800.518.8964 during standard business hours, as well as evenings and weekends for your convenience.

If you prefer, we’re happy to reach out to you as well; just enter your contact information into the blue text box on the right side of this page. Sleep better tonight knowing that you have a knowledgeable and reputable team of tax professionals safeguarding your good standing with the IRS. Call today!

 

Sources

[1] Here’s how and when to pay estimated taxes. (2018, November 5). Retrieved from //www.irs.gov/newsroom/heres-how-and-when-to-pay-estimated-taxes

[2] Estimated Taxes. (2019, April 22). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

Walter Wotman, CPA

Founder & Managing Partner

Walter Wotman, CPA is the author of "Tax Champions Guide to Tax Resolution." Amazon #1 Best Seller in the Personal Finance category. He is one of America's most experienced tax negotiators with over 35 years of experience helping thousands of clients settle difficult back tax issues.
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