The Basics of Estimated Tax Payments and Deadlines
STLTaxLawyer Mark Milton explains the basics of estimated tax payments and key estimated tax deadlines.
Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed, according to the IRS. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.
Most of the population are W-2 employees whose employers withhold taxes from every paycheck. But for those who are self-employed or are 1099 independent contractors, you have an obligation to make estimated tax payments throughout the year so you don’t have a huge tax bill at the end of the year.
“We have a ‘pay as you go’ tax system in America where you are required to pay taxes as you earn money,” Mark said. “So that’s the idea behind estimated tax payments for those workers who aren’t having tax money withheld from their paycheck in order to avoid having a huge tax bill at the end of the year.”
The IRS estimated taxes website has plenty of information to help guide those taxpayers who are required to make estimated tax payments, but here is a general overview of important information to remember:
- Due to COVID-19 tax relief, first and second quarter estimated tax payments for 2020 are now due by July 15, 2020, and third quarter payment is due by September 15, 2020.
- There are four payment period deadlines each year, but the IRS does allow you to pay estimated taxes weekly, monthly, etc., just as long as you’ve paid enough by the end of each quarterly payment period.
- There are penalties for underpayment of estimated taxes and for failure to file estimated taxes, which generally carries a stiffer punishment.
- Estimated taxes can be paid online at https://www.irs.gov/payments.
“It’s a different world when you have to worry about making estimated tax payments since you don’t have the luxury of an employer holding the taxes from your check and you don’t think about it much,” Mark said.
If you need help with estimated tax payments and tax preparation services, then please call STLTaxLawyer Mark Milton today at 314.394.3370 for your consultation.