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Business owners and self-employed taxpayers are required to pay quarterly taxes, the deadline is approaching. The tax season is upon us and it’s important to pay as promptly as you can to avoid costly penalties. The filing deadline for the last 2021 quarter is January 18, 2022. If possible, the IRS recommends making an estimated tax payment to ensure a problem-free process.
How to Avoid Penalties
Income taxes should be paid throughout the year as income is earned. This helps taxpayers make smaller payments, rather than owing a large sum in the last quarter.
This is done by either withholding from paychecks or other compensation, or by making quarterly estimated tax payments. These options help taxpayers avoid surprise tax bills, which are often accompanied by a penalty.
If you did not make payments throughout the year, you can still make a payment to cover the missed quarters. By making a payment before the April filing deadline, a penalty will usually be smaller and may even be eliminated altogether. This is because the penalty calculation considers the date on which your payment was made.
Who should make a payment?
Most people who owed taxes after filing their 2020 return may owe again when they file for 2021. This is due to a lack of withholding, or not withholding enough throughout the year. You may also be in this situation if you itemized in the past, but now take the standard deduction, have a complicated tax situation, have a two-wage household, or you’re an employee with non-wage sources of income. If you did not withhold taxes from unemployment, you should also consider an estimated tax payment. Families who received advance payments of the Child Tax Credit during 2021 but don’t expect to qualify when filing their 2021 return, may also need to make an estimated tax payment.
Keep in mind that most income is taxable. Wages, interest, investment income (including virtual currencies), refund interest, and gig economy income are all taxable.
Making an estimated tax payment
The IRS provides a Tax Withholding Estimator to help you determine if you need to make a payment. You can fulfill your payment electronically using IRS Direct Pay, or through your IRS Online Account.
Do you owe for previous tax years?
Owing back taxes that accrued egregious penalties can be very stressful. Finding a tax relief company can be very confusing as there are so many. To ensure that you get caught up on missed years and are in compliance with the IRS, our IRS problem-solvers recommend the assistance of the tax practitioners at Flat Fee. Give us a call at 866-747-7435 for a free consultation.