Estimated Income Tax Payments
When you file your individual income tax return, do you usually owe taxes? If you do, then this is an indication that you are either not having the proper withholdings from your paycheck OR if you do not receive a W-2 for income, then you should be making estimated payments.
What is the consequence if you are owing more than $1,000 in taxes when filing your return? How does penalties and interest of an additional 50 percent of taxes sound to your budget? Penalties and interest could each amount to 25 percent of the tax owed – think about it – that could equal an additional 50 percent of taxes.
How is that possible? Up to 25 percent for each of the failures to make estimated payments and for interest on the underpayment of taxes… And, no one wants to see that. So, what should you do, especially since an estimated tax payment will soon be due?
If you are uncertain about making estimated payments, visit irs.gov and search for Form 1040-ES, Estimated Tax for Individuals. There is a worksheet for you to plug in numbers and perform a calculation to see if you are on track for your payments. Or, if you have wages and taxes that are being withheld, speak to your payroll department about having additional taxes withheld from your paycheck.
There are several options available for making estimated payments. You can have the payments paid directly from a bank account, you can pay by credit or debit card, you can use the Electronic Federal Tax Payment System, and last but not least, you can mail a check or money order to the IRS. (If mailing the payments, I recommend that you send them via certified mail so you have a receipt for when you actually mailed the same.)
Don’t pay more in taxes than you need to, but do meet your obligations. Remember, estimated tax payments are due April 15, June 15, September 15 and January 15. DON’T BE LATE.
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