What You need to Know about Estimated Tax Payments

Single-owner LLCs and multi-owner LLCs are required to make estimated tax payments on a quarterly basis after the first year of commencement of their business. If you have formed such an entity, you ought to ensure that you make your estimated tax payments on time so that you don’t end up with a huge tax bill at the end of the tax year and if you fail to submit a certain amount you can even be penalized by the IRS.

You do not want to be penalized by the IRS. This will take money from you that you could have spent on Transformer DVDs, a new paint job for your F150, another pair of Nikes, some kitchen utensils, another couch, a flat screen for your bedroom that is on mounted on the ceiling, a walk-in shower, more time at The Home Depot, another bike for your child, a nice restaurant outing with your mother, a better collar for your dog, and so on.

It is also less money you can donate to animal protection agencies, your church, the Girl Scouts, the Knights of Columbus, Wounded Warrior, and the list continues. You do not need a tax lawyer for this.

Quarterly Payment Helpful Hints

To calculate your estimated quarterly taxes you need to use IRS Form 1040 ES. There are a few factors you ought to be aware of when making estimated tax payments and tax lawyers work in the confines of this system all the time.

• Pay the right amount and make sure the amount is paid on time.
• Specific due dates have been set by the IRS which is usually mid-April, mid-June, mid-September, and mid-January.
• Calculations are to be based on your expected adjusted gross income (AGI), taxable income, deductions, tax credits, and other taxes.
• You can use last year’s return as a base for the current year’s calculation.
• Use the worksheet on Form 1040 ES to calculate each estimated tax quarter.
• IRS can impose strict penalties for late payments even if you are eligible for a refund at the end of the tax year.
• You have the option of making weekly or monthly payments as long as meet the quarterly requirements.
• It is judicious to set up a separate bank account for estimated tax payments in order to ease the burden.
• Payments can be made through the Electronic Federal Tax Payment System (EFTPS).
• According to the IRS, 90% of the tax estimated for the current year or 100% of the previous tax year is required to be paid, whichever is smaller.
• The IRS sets an interest rate for underpayments every quarter. 

Any questions about this? Think you need some legal help? Click right here: Tax.USAttorneys.

Short Method of Estimating Payments

There are several ways to calculate estimated tax payments. Among the shortest methods is to take the previous year’s total tax liability and subtract withholdings for the current year. If the amount of withholdings is similar to last year, you can deduct the same amount. The difference is the amount of estimated tax payment you will need to make in order to avoid a penalty and tax attorneys help their clients on this front all the time.

Know Your Taxes

Another method is to total the income and deductions for the year. However, you will need to know the current tax rates. Subtract all withholdings and tax credits that you are eligible for. This can be easily calculated on the worksheet available on Form 1040 ES. The worksheet features the current rates for standard deductions and tax rates. This will help you make an accurate evaluation of your estimated tax payments for the current year. All you need to do is save the worksheet for future reference.

It is wonderful to pay your taxes on time and it is the sensible thing to do. You do not want to get penalized and you want to save money and it hard to save money if you have to pay even more taxes to the IRS. America is in a recession because of high taxes and anti-business regulations such as from the EPA, Dodd/Frank, the ACA and if you have a business you may already know about this. If you are organized and remain on top of your game you will not be punished by the IRS.

Looking Ahead

Any overpayments made can be applied to the next year. It is vital to check with your state department on the rules and regulations concerning estimated tax payments since some states have different requirements. The bottom line is to make your estimated tax payments on time. The best plan to follow is to make accurate payments at the appropriate time in order to save money in the long run.

If you haven’t filed tax returns on time, owe back taxes, have received a notice from the IRS or any other tax issue, the good news is there is always a reasonable solution that can be obtained. However, you will need the expertise of a tax lawyer to help put those tax problems behind you.