Who should make Estimated Tax Payments?

For the most part estimated tax payments are to be made quarterly. As the name denotes, this tax is based on your estimated income for the year and is required to be paid by self-employed individuals and those earning an investment income such as rents, dividends, interest, awards, and any other source of income other than a salary. The total amount to be paid is divided into four quarters, with the first payment to be made in mid-April.

Entities that must make Estimated Tax Payments

According to expert tax lawyers, sole proprietors, partnerships, and S corporation shareholders are required to make estimated tax payments when their tax liability is more than $1,000 for the year. Payment is required to be made by using Form 1040-ES.

Corporations are required to make estimated tax payments when they owe a tax $500 or more.

Does this sound complicated? Are you getting nervous? Do you have enough on your plate as it is? You may need legal help. You need to click right here (Tax.USAttorneys) so you can free your mind of these burdens. You have a business to run, some things you should not have to worry about.

If your withholdings do not cover 90% of your tax liability then you are required to pay an estimated tax. The only exceptions are:

1. If the amount due is less than $1,000 after subtracting withholdings and tax credits.
2. If the withholdings and credits are equivalent to your previous year’s tax return.

If you receive a large amount in a year, you may be able to use this to your advantage and delay tax payment based on the second exception, suggest tax attorneys.

You may not be liable to pay estimated tax if:

• There is no tax liability for the previous year
• Your tax year covered a 12-month period
• You were a US citizen or resident for the entire year

If there is a significant increase in your income and you are not subject to income tax withholding you are most likely to have to make estimated tax payments and a tax lawyer can help you out with this.

As a self-employed individual you will not have any income tax withheld, therefore you are responsible for making estimated tax payments, which federal income tax and self-employment tax.

In the movie Transformers 2 – Leo Spitz (Ramon Rodriquez) had his own online business. He would have to pay some self-employment taxes. He may have even had employees or independent contractors as well who were his classmates. That would be another tax responsibility. How he did this and his school work, he must have been pretty bright. He was obviously extremely ambitious and focused – a true multi-tasker. Too bad he thought he owned Sam Witwicky! 

Special Rules

Taxpayers with two-thirds of their income from farming or fishing are required to make estimated tax payments at a lower rate of 66.23%.

One of the main advantages of making estimated tax payments is that you are not left with a huge tax bill at the end of the year. As a self-employed individual, you need to look at it as an amount being withheld if you were an employee. You can use the previous year’s tax return to file an appropriate estimate for the current year as well.

What’s important is that you pay the appropriate amount in time on the specified due dates set by the IRS. Late payments attract a penalty, caution expert tax lawyers. Any underpayment is also punishable, even if you are entitled to a refund at the end of the year. Therefore, it is advisable plan ahead and set aside the estimated amount – your tax lawyer will work with you on this – it is not that hard to figure that out at this point. You may also pay weekly or monthly as long as you achieve the required amount at the end of the quarter. 

Estimated tax payments can be made through the Electronic Federal Tax Payment System (EFTPS). If you are a first-time entrepreneur, handling this tax burden may be a major concern. However, once you have established a system where you are able to determine your tax liability, the process will seem easier and you will be able to handle your finances better.

Every three months or about, you will have to put a check in the mail and mail it to the right address. Your tax lawyer will give you little slips to put in the envelope to make sure the IRS knows what the check is for and so on.

If you need help with estimated tax payments, penalty abatement, Offer in Compromise, or any other fair tax relief solution, what you need is a tax lawyer. Your legal counselor will negotiate with the IRS on your behalf and assist in negotiating a favorable agreement to clear your tax debts and your name!