Tax Payments
Estimating Your Tax Payments
Ours is a Voluntary tax system. Voluntary does not mean you can volunteer to file your tax return one year and not another. Voluntary does mean that we volunteer our information to the Internal Revenue Service. We voluntarily claim the deductions we enter on our tax returns. Other countries do not have the same kind of voluntary system we enjoy here in the United States.
Remember that anyone who pays you generally has to file a W2 or a 1099 to let both you and the IRS know the income you should be including on your tax return. If you accidentally leave something out you will hear from the IRS. They will want to clarify this with you. If you deliberately omit income from your return, you will hear from the IRS. They will certainly want to talk with you. And you will be flirting with a variety of tax penalties.
When you are paid on a W2, you tell your employer how many exemptions you want to claim. Your income tax withholding is based on the number of tax exemptions you claim. The more you claim, the less tax is withheld. You can adjust you withholding throughout the year with your payroll department.
You may have taxable income from other sources that do not have income taxes withheld. Some of this “other” income could be sale of property, gambling winnings, and most commonly your small business or independent contractor income. You will want to estimate your other income and estimate your taxes to keep from being horribly surprised at tax time.
According to me, Nellie Williams, “An Estimate is not a Guesstimate.” You can quote me on that. An estimate is based on current facts or based on past true numbers. These numbers are not PFA (Plucked From the Air) or WOTC (Written On The Ceiling). They may truly be SALY (Same As Last Year).
Estimated Tax Payments are made every quarter. The trick is, these quarters are not even quarters. To me a quarter of the whole is one-fourth. To the IRS, it is based on their own calendar. Mark the dates 4/15, 6/15, 9/15 and 1/15 on your own calendar if you need to make estimated tax payments.
The First Quarter, or Q1, is a true quarter of three months, January, February and March. Form 1040-ES for Q1 Estimated Tax Payment, is due by the 15th day of the following month, or April 15th.
The Second Quarter is TWO months, April and May Form 1040-ES tax payment for Q2 is due by June 15th.
The Third Quarter is back to three months, June, July, August. 1040-ES tax payment for Q3 is due by September 15th.
The Fourth Quarter covers FOUR months, September, October, November and December. 1040-ES tax payment for Q4 is due January 15th. Understand that the payment you make in the first fifteen days of the following year is really for the previous year. So when you make your January 15, 2015 1040-ES tax payment, it is made in calendar year 2015, but it is applied to your 2014 tax liability.
Your tax return preparer will know how to help you with this. If you don’t have a tax return preparer, you are welcome to consult with me. If you would like to schedule a time to talk, email Nellie@BulletProofYourTaxes.com.
Remember this. Failing to Plan is Planning to Fail. Nobody ever PLANS to pay more than they have to. So keep you eyes open on your own tax situation to keep the IRS out of your wallet.