The Internal Revenue Service (IRS) has announced that the deadline for taxpayers to pay estimated taxes for the second quarter is June 15. Individuals, including sole proprietors, partners and shareholders of S corporations are required to make estimated tax payments.
If you expect to owe $ 1,000 or more in taxes when you file your income tax return, you’ll probably need to make estimated tax payments to the IRS.
Estimated quarterly tax payments due June 15th
The estimated tax is a quarterly tax payment for the year based on the reported income for the period. Most of them are small business owners, self-employed and independent contractors who are often required to pay taxes quarterly. The IRS requires that quarterly estimated tax payments be filed for those who do not have their taxes automatically withheld from their paychecks, as regular employees do.
Estimated taxes apply to any type of taxable income that is not subject to withholding tax. This includes earned income, dividend income, rental income, interest income, and capital gains. In addition, it also applies to:
- Self-employment on the net income of a self-employed person to pay Social Security and Medicare taxes
- Alternative Minimum Tax (AMT) if it exceeds the usual tax
- 8% of the net investment income, including the business income of an owner who does not materially participate in the business activities (ie a passive investor)
- 9% Medicare additional tax on net self-employment income and wages if adjusted adjusted gross income exceeds a reporting status-oriented threshold
- Labor taxes on the salaries of domestic employees
You can avoid paying estimated taxes in two ways: If you have a working spouse who agrees to increase your payroll withholding to cover your obligation as long as you file a joint return; or opt for S corporation status if you are a limited liability company (LLC) where you get a salary from the business whose withholding can be made.
Who doesn’t have to pay the estimated tax?
If you currently receive salaries and wages, you can avoid having to pay an estimated tax by asking your employer to withhold more taxes from your earnings. For this to happen, you must submit the W-4 form to your employer. There is a special line in the W-4 form for you to enter the additional amount you want your employer to withhold.
In addition, you are not required to pay the estimated tax for the current year if you meet the following three conditions: you have not had any tax arrears in the previous year; you were a U.S. citizen or resident throughout the year, and the previous fiscal year covered a 12-month period.
How can you pay your estimated taxes?
You can use form 1040-ES to calculate your estimated tax. You can then pay your taxes by mail check or pay by money order to the United States Treasury. However, there is a faster and easier option available through the Electronic Federal Tax Payment System (EFTPS). They can do this by securely signing in to their IRS online account or by using direct payment from the IRS to send a payment from their checking or savings account. They also have the option to pay by debit, credit or digital wallet. However, in the payment of taxes with debit or debit cards, the payment processor will apply additional charges.
Taxpayers are required to make a quarterly payment the first installment was on April 15, 2022; the second and imminent one is June 15, 2022; the third on September 15, 2022; and the final on January 12, 2023. Taxpayers are encouraged to make estimated tax payments in four equal amounts to avoid a penalty. However, if they receive income unevenly throughout the year, they may vary their payment amounts to avoid or reduce the penalty using the annualized split method.
Taxpayers can use the IRS’s interactive online tax assistant to see if they have to pay estimated taxes. They can also consult the Form 1040-ES Worksheet, Estimated Tax for Individuals, for more details on who should pay the estimated tax. Corporations, on the other hand, must make estimated tax payments if they expect to owe $ 500 or more in taxes when they file their return.
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