An important tax deadline is coming up and missing it could cause you to collect some IRS penalties. 3rd quarter estimated tax payments (ETP) are due Friday, September 15th. Estimated tax payments are a method of paying the tax on income that is not subject to withholding tax. This can include income from self-employment, business earnings, interest, rent, or other sources. The IRS requires these payments to be made quarterly. If you underpay your estimated tax payments, you will end up having to write a bigger check to the IRS when you file your tax return. If you overpay, you will receive the excess amount as a tax refund once you file. If this is your first time making an estimated tax payment or you aren’t sure if this applies to you, the process is simple.
1.) Who pays Estimated Tax Payments?
Several factors go into whether or not you have to pay quarterly tax payments. For instance, most people who are required to make estimated tax payments are self-employed or sole proprietor business owners. If you have income from your own business and your tax liability after you file is expected to be over $1,000, you will need to make ETPs.
If you owed taxes after you filed your tax return last year, there is a very good chance you will owe again this year and the IRS will want you to make an ETP. If you’re having to make ETP it probably means that not enough taxes were withheld from your paycheck or you had other income that increased your tax liability. Check with your employer or a tax professional if you aren’t sure whether you should make an estimated tax payment.
2.) How Do You Make Estimated Tax Payments?
The IRS tries to make it simple for you to pay your estimated tax and they provide you with a form that will help you not only calculate your ETP, but pay it as well. The form you can use to calculate and pay your ETP is the IRS Form 1040-ES Estimated Tax for Individuals. When determining how much you must pay, you must basically get together all your income, your deductions, credits and paid taxes, as if you were filing a yearly tax return. Each year is divided into 4 payment periods and each one has its own deadline. Missing a deadline or not paying on time can result in penalties from the IRS.
The next upcoming ETP deadline is September 15th, this is for the period from June 1st to August 31st. After that, the next ETP will be due January 15th. If you do miss one payment, do not wait until the next deadline, send in your payment as soon as you can.
If you are unsure if you need to make an ETP or are having trouble calculating how much to pay, Polston Tax can help. Our team of tax accountants and attorneys can help decide what deductions and incomes you need to take into considerations. Give us a call at 844-841-9857 or fill out the form below for a free consultation.