Taxpayers who paid too little tax during 2019 can still avoid a tax-time surprise by making a quarterly estimated tax payment now, directly to the Internal Revenue Service. The deadline for making a payment for the fourth quarter of 2019 is Wednesday, January 15, 2020.
If you or your accountant failed to plan for tax time, you can still lower your tax bill or avoid it altogether by taking some actions before December 31. If you own a business, buying vehicles, equipment, increasing your paycheck tax deductions or even putting some money on a retirement account can make a huge difference, so you can keep more of your money in your pocket. At ACR we specialize in accounting, payroll and tax planning. We concentrate on your business, we take care of tax headaches. Make an appointment today.
Who Must Pay Estimated Tax
Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.
Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.
How To Figure Estimated Tax
Individuals, including sole proprietors, partners, and S corporation shareholders, generally use Form 1040-ES (PDF), to figure estimated tax. Corporations generally use Form 1120-W (PDF), to figure estimated tax.
To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.
Penalty for Underpayment of Estimated Tax
If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholding and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen. Please refer to Publication 505, Tax Withholding and Estimated Tax, for additional information.