The Internal Revenue Service (IRS) has announced that the deadline for taxpayers paying 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 pay $1,000 or more in taxes when you file your income tax return, you probably need to make estimated tax payments to the IRS.
Quarterly Estimated Tax Payments Due June 15
Estimated Tax is a quarterly payment of taxes for the year based on your reported income for the period. Most of these are small business owners, freelancers and independent contractors who often have to pay quarterly taxes. The IRS requires quarterly estimated tax payments to be filed for those who have not automatically withheld their taxes from their paychecks, as regular employees do.
Estimated taxes apply to any type of taxable income that is not subject to withholding. This includes earned income, dividend income, rental income, interest income and capital gains. In addition, it also applies to:Self-Employed on Net Self-Employment Earnings to Pay Social Security and Medicare Taxes Alternative Minimum Tax (AMT) if it exceeds regular tax 8% on net investment income, including business income for an owner who does not materially participate in business activities ( i.e., a passive investor) 9% additional Medicare tax on net self-employment income and wages if the modified adjusted gross income exceeds a threshold amount aligned to filing for Employment Taxes on wages for your domestic workers
You can avoid paying estimated taxes in two ways: If you have a working spouse who agrees to increase his/her payroll deduction to cover your obligation, provided you file a joint return; or opt for S corporation status if you are a limited liability company (LLC) where you can receive a paycheck from the company upon which deductions can be made.
Who Doesn’t Have to Pay Estimated Tax?
If you are currently receiving salaries and wages, you can avoid paying an estimated tax by asking your employer to withhold more tax from your earnings. For this to happen, you must submit Form W-4 to your employer. There is a special line on Form W-4 where you can enter the additional amount you want your employer to withhold.
In addition, you do not have to pay estimated tax for the current year if you meet all three of the following conditions: you had no tax arrears in the past year; you were a US citizen or resident all year and your previous tax year was 12 months.
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 sending a check or paying by money order made payable 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 logging into their IRS Online account or by using IRS Direct Pay to make a payment from their checking or savings account. They also have the option to pay by debit card, credit card or digital wallet. However, when paying taxes with debit or debit cards, additional fees are charged by the payment processor.
Taxpayers are required to make a payment every quarter, the first installment was on April 15, 2022; the second and the approaching one is on 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 fine. However, if they receive unequal income during the year, they can vary the amounts of the payments to avoid or reduce the penalty by using the annualized payment method.
Taxpayers can use the IRS Interactive Tax Assistant online to see if they are due to pay estimated taxes. They may also refer to the worksheet in Form 1040-ES, Estimated Tax for Individuals, for more information about who should pay the estimated tax. For their part, corporations must make estimated tax payments if they expect to pay taxes of $500 or more when they file their returns.
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This post Payments of tax liabilities in the 2nd quarter this week was original published at “https://smallbiztrends.com/2022/06/second-quarter-tax-liability-payments-due-june-15.html”