Posts Tagged ‘Estimated Tax Payments’

Do You Need To Make Quarterly Estimated Tax Payments????

Tuesday, April 8th, 2014

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

Tips on Making Estimated Tax Payments

 

If you don’t have taxes withheld from your pay, or you don’t have enough tax withheld, then you may need to make estimated tax payments. If you’re self-employed you normally have to pay your taxes this way.

Here are six tips you should know about estimated taxes:

1.   You should pay estimated taxes in 2014 if you expect to owe $1,000 or more when you file your federal tax return. Special rules apply to farmers and fishermen.

2.   Estimate the amount of income you expect to receive for the year to determine the amount of taxes you may owe. Make sure that you take into account any tax deductions and credits that you will be eligible to claim. Life changes during the year, such as a change in marital status or the birth of a child, can affect your taxes.

3.   You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 16 and Sept. 15 in 2014, and Jan. 15, 2015.

4.   You may pay online or by phone. You may also pay by check or money order, or by credit or debit card. If you mail your payments to the IRS, use the payment vouchers that come with Form 1040-ES, Estimated Tax for Individuals.

5.   Check out the electronic payment options on IRS.gov. The Electronic Filing Tax Payment System is a free and easy way to make your payments electronically.

6.   Use Form 1040-ES and its instructions to figure your estimated taxes.

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcast:

Important Information on Late Filing and Late Payment Penalties

Thursday, April 18th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

It is not possible to determine the number of taxpayers who do not fully understand all of  the requirements to ensure that your quarterly estimated  tax payments, annual tax liability, and filing deadlines have been fulfilled.  The tax system for the United States is based on a “pay-as-you-go” expectation.  Among the key provisions that affect all of us are:

1.  The Department of the Treasury requires that all taxpayers deposit one fourth of their annual income tax liability each quarter;

2.  The annual tax liability can be fulfilled in several ways, i.e. payroll withholding from wages, voluntary tax withholding from lump sum payments (sales of investments, withdrawals from retirement plans, etc) or through quarterly estimated tax deposits ( http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes and http://www.irs.gov/uac/Newsroom/Six-Tips-on-Making-Estimated-Tax-Payments);

3.  IRS Form 2210 is required to be completed and filed if you have not met the quarterly and annual requirements.  However, there are “safe harbor rules” and exceptions which could provide you with a waiver (http://www.irs.gov/instructions/i2210/ch01.html#d0e151 ) of the tax penalties and interest;

4.  While you may request an automatic six-month waiver of the tax return filing deadline, this waiver does NOT extend the deadline date for the payment of  your annual income tax liability.    (more…)

Are You Meeting Your Quarterly Tax Deposit Obligations?

Saturday, April 2nd, 2011

This subject has been one of the toughest for past clients, other taxpayers, and my college students to comprehend.  This is especially true when discussed in conjunction with the submission of a request for an automatic six-month extension for the time to file a tax return.  The logic is usually communicated in some variation of “I just requested a six month extension for filing my tax return, so I now have six months in which to find the money to pay the taxes that I owe.”  That’s not exactly the way that the system works.  Under certain circumstances, you could be required to have a mandatory 28% of your income withheld to fulfill the “backup withholding” requirements.

The United States income tax system is structured on a “pay-as-you-go” basis.  This means that your income taxes must be paid as you earn or receive your income throughout the year.  You can fulfill this requirement in either one of two ways, which includes a combination of both: 1)  through the payment of Federal (and State) withholding, or 2) by making quarterly estimated tax payments.  If you do not pay your quarterly taxes through withholding taxes or do not pay enough in taxes using that method, you may also be required to make quarterly estimated tax payments.  If the total of all of your tax payments for the year were not paid (remitted) either through withholding or estimated tax payments, you may incur both an underpayment tax penalty and interest for the underpayment of your annual estimated tax obligation. (See the instructions for completing Form 2210).  Addtional information can be obtained from Tax Topic 306

The easiest method to meet this requirement is through the Electronic Federal Tax Payment System (EFTPS).  There is usually a State equivalent.  You can apply and enroll online at http://eftps.com  The website allows you to designate a bank account from which the funds will be withdrawn electronically.  You can also set up future, recurring quarterly payments and amounts.  Not sure of the amounts?  The system can accomodate changes/updates 24 hours or more in advance of the due date.  If you don’t want the U.S. Treasury to have access to your personal bank account, then contact your bank and set up a separate account just for your tax payments.  There is usually no addtional cost for this account.  If there is, join a credit union!   (more…)