How much should a taxpayer pay in estimated tax payments? Well, it depends. Wages earned from an employer typically have taxes withheld. If you have taxable income that does not have taxes withheld, taxes are due when the income is earned or received. If you were surprised by a large balance due at the completion of your income tax return, you will want to consider making estimated tax payments. Estimated tax payments are made during the tax year to reduce the large tax balance due. How much of an estimated tax payment a taxpayer should make is going to vary from taxpayer to taxpayer.
WHAT are estimated tax payments?
Estimated tax payments are taxes paid on income not subject to tax withholding. Taxable income includes but is not limited to interest, dividends, alimony, business income, capital gains, prizes and awards, rental income, and flow-through income. Estimated tax payments include income tax and self-employment tax. A taxpayer should pay estimated tax payments on income that is subjected to tax withholding but the taxpayer has opted out of such withholdings.
WHO should pay estimated tax payments?
If you expect to owe more than $1,000 on the current year’s tax return or you owed taxes on the previous year’s tax return, you will want to consider making estimated tax payments. If you are receiving taxable income which has no taxes withheld, you are required to make estimated tax payments.
WHEN are estimated tax payments due?
Estimated tax payments are due quarterly – April 15th, June 15th, September 15th, and January 15th. The payments are for the income earned during the period.
WHERE are estimated tax payments made?
There are several convenient and secure ways to pay the federal estimated tax payments online. Another safe option for making payments is by telephone or using the app on your mobile phone. While checks and money orders are acceptable, mail-in payments are not the preferred method of making estimated tax payments. The same payment options are available for most estimated tax payments for the states. With all of the options, verify with your accountant that you are using a certified and secure method. Your accountant can also provide you with all the information that will be required when making the payment.
WHY are estimated tax payments paid?
Tax payments are required. As Benjamin Franklin stated, “in this world, nothing is certain except death and taxes.” Making estimated tax payments reduces or eliminates penalties and interest on the taxes you owe.
HOW much of an estimated tax payment should you pay?
This is a question that does not have a definitive answer. It depends. The tax owed by a taxpayer depends on individual elements. Your accountant should consider all of your factors. Contact your accountant to determine how much you should pay. If you do not have an accountant, feel free to contact me and I will be more than happy to assist you.