How To Pay Estimated Taxes By William Perez You need to make estimated tax payments if your income tax withholding will not fully cover next years tax liability. This applies mostly to self-employed people, landlords, and investors. This is because your income tax withholding from your employment may not be sufficient to pay your federal income tax in full by the end of the year. Difficulty: Average Time Required: About 1 Hour Heres How: Get out your most recent tax return. Look at two crucial lines on your tax return: your total tax and your withholding. On Form 1040, this would be lines 62 (total tax) and 63 (withholding). Subtract the two figures. Total tax minus withholding. The result is your unfunded tax liability. Divide this figure by four (if you want to make quarterly payments) or by twelve (if you want to make monthly payments). Estimated tax payments are due by April 15th, June 15th, September 15th, and January 15th. Please note, even though estimated taxes are often referred to as quarterly payments, the deadlines are not three months apart from each other. If you expect your income to increase or to decrease significantly, you may want to calculate your estimated taxes using your projected total income. I provide some tips on how to go about calculating how much to pay in estimated taxes. If you are self-employed, dont forget to estimate both your regular income tax and your self-employment tax. Mail your estimated tax payment to your IRS Service center using Form 1040-ES (PDF format). The form 1040-ES is a payment voucher and helps to ensure that your payment is processed correctly by the IRS. The payment voucher should accompany your check for payment. Make your check payable to United States Treasury and be sure to put your Social Security Number and the tax year for which you are making payment in the memo area of the check. For example, you might write 123-45-6789 Year 2013 Form 1040-ES in the memo area. Better yet, make your estimated tax payments via the Electronic Federal Tax Payment System, or EFTPS. EFTPS is online bill pay for your federal taxes. What I like most about EFTPS is the ability to set up recurring monthly payments, so paying estimated taxes becomes part of the monthly budget. Also, you can print out a report of all estimated tax payments, which comes in handy at tax time. Be sure to keep a copy of your canceled check, or print out the canceled check (both front and back) from your banks Web site. Keep this along with your tax records as proof of payment.
Posted on: Tue, 15 Oct 2013 03:38:26 +0000