Are you a taxpayer who should be making estimated tax payments throughout the year?
The IRS states that individuals and businesses alike are required to pay taxes as income is earned or received throughout the year, either through withholding or estimated tax payments. That’s why those who are self-employed or in the gig economy usually need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.
If a taxpayer doesn’t pay enough tax through withholding and estimated tax payments, they may be charged a penalty. They also may be charged a penalty if estimated tax payments are late, even if the taxpayer is due a refund when they file their tax return. However, generally, paying quarterly estimated taxes will lessen or even eliminate any penalties.
Who must pay estimated tax
Individuals, including sole proprietors, partners, and S corporation shareholders, generally must make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. Corporations generally must make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.
If the taxpayer has an additional job where they are paid wages, adjustments can be made to their W-4 withholding to cover their tax liability, as an alternative to paying estimated taxes. See the IRS Tax Withholding Estimator for more information.
How to pay estimated tax
Using an electronic payment option available on irs.gov/payments is the easiest way for individuals, small businesses, self-employed individuals and gig workers to pay federal taxes. It’s fast, easy and secure.
- Taxpayers can use the Electronic Federal Tax Payment System for all their federal tax payments, including federal tax deposits, installment agreement payments and estimated tax payments. In addition, by using the EFTPS, taxpayers can access a history of their payments, so they know how much and when the payments were made.
- Individual Taxpayers can create an IRS Online Account to make their estimated tax payments. Using their account, taxpayers can see their payment history, any pending payments and other useful tax information.
- Individual taxpayers can also make an estimated tax payment by using IRS Direct Pay.
- Individual and Business taxpayers can also make an estimated tax payment by using debit, credit card or digital wallet.
For more information, including payment dates, please visit the Estimated Taxes page at IRS.gov
For help calculating your estimated taxes, please schedule a consultation by following this link - https://calendly.com/karasseipeltax