Estimated tax payments due April 15 and June 15 of 2020 now have an extended due date to July 15, 2020. This was extended to give everyone some relief if their cash flow was affected by the economic issues created by the media/state governors regulations and the virus suspected to be manufactured by the Wuhan Lab. All individuals or corporations owing these quarterly estimated payments may postpone paying them until July 15 without penalties.
The Treasury Department and Internal Revenue Service are making special provisions for businesses and individuals. These cover federal income tax returns and federal tax payments but no state tax payments or other types of federal tax.
How do I know if I owe quarterly payments?
Businesses on a schedule C and self-employed persons often need to pay quarterly estimated tax payments. Sometimes investors, real estate owners and other similar occupations who owe at the end of the year will as well. This is due to not having taxes withheld during the year like you would on a W2.
Farmers, fishermen, casualty and disaster victims, disabled persons and recent retirees sometimes receive exceptions as their income can be uneven through the year.
Underpayment penalties can be avoided if estimated tax payments are made or less than $1,000 is owed at the end of the year. For 2020, at least 90% of estimated 2020 tax needs to be paid in advance in quarterly payments.
How Federal Taxes work
Federal taxes are supposed to mainly be paid during the year and then “settled” at the end of the year. They will either be withheld from your paycheck (when you work for a company) or you can make quarterly estimated tax payments throughout the year.
How can I avoid paying estimated tax?
If you earn salaries/wages and you end up owing at the end of the year, fill out a new W4 and have your employer withhold more from your paycheck. The IRS has created a tool called the Form W-4Tax Withholding Estimator which can help ensure the correct amount is getting withheld. This was created to replace the Withholding calculator on IRS.gov and cater to the need for things to adapt to mobile use. This is an effective and accurate method to make sure the correct amount is being withheld.
Paying estimated taxes
Estimated taxes can be paid using Form 1040-ES, Estimated Tax for Individuals. They can also be electronically paid at IRS.gov/payments. The payments can be scheduled up to 30 days in advance with Direct Pay or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS).
Published by Laura R Fleig, www.fleigfinancialsllc.com
June 9, 2020
Sources:
www.irs.gov “IRS reminder: Deadline postponed to July 15 for those who pay estimated taxes” IR-2020-117https://www.irs.gov/newsroom/irs-reminder-deadline-postponed-to-july-15-for-those-who-pay-estimated-taxes, June 9, 2020
