Six tax tips on estimated tax payments

Six tax tips on estimated tax payments

Estimated taxes must be paid as you receive or earn any income during the year. If you are an employee, your employer usually withholds your taxes based on the data provided in the form W4. If you are 1099 contractor or you are running your own business, you are required to estimate taxes due and remit to the IRS.

If at the time of tax filing, the amount due is more than your estimated taxes paid you will be charged penalties and interest would continue to accrue until the balance is paid. Therefore, all business owners, self-employed and contractors should ensure you estimate your quarterly income and remit taxes  each quarter.

Below are six tax tips on estimated taxes

• Who must pay estimated taxes: Individuals, sole proprietors, partners and S Corporation shareholders have to make estimated taxes if they owe $1,000 or more when the return is filed.

C Corporations have to make estimated payments if they expect to owe at least $ 500 or more when the return is filed.

• When are you required to pay estimated taxes: If you expect to owe at least $1,000 in tax for 2016 after subtracting your withholding and refundable credits. There is a special rule that applies to fishermen and farmers.
• How to figure out the tax due: IRS has provided a form 1040 ES which you can use to estimate your quarterly taxes.
• When you should make the tax payments: You make estimated tax payments four times during the year.
  1. January 1-March 31 Due date is April 15th, 2017
  2. April 1- May 31 Due date is June 15th, 2017
  3. June 1- August 31st Due date is September 15th, 2017
  4. September –December 31 Due dates are January 15th, 2018 next year.

(Special rules apply to farmers and fisherman – Publication 505 has more information, source IRS.gov)

• When to change payments or withholding: Major life changes like the birth of a child, marriage etc. can affect your taxes. When these changes happen, you may need to review your estimated tax payments for the year. You can use W4 –Employee’s withholding allowance certificate. You can also use the IRS withholding calculator to understand your exemptions and withholding.
• How to pay estimated taxes:  You can pay online, by phone or from your mobile device. Direct pay is a secure online service to pay your tax bill on your estimated taxes directly from the bank or savings account. You can visit https://www.irs.gov/payments for various options.

 

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Posted In: Tax

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