We're well into the second full week of June and you know what that means.
Yes, it does mean that time flies, regardless of whether you're having fun.
And yes, it also means that parents must figure out ways to deal with kids who are now out of school.
But it also means that it's time to pay the year's second estimated tax installment.
Who has to pay estimated taxes? Many estimated tax filers are like me, self-employed so we don't have tax withholding coming out of our income.
Others have different types of income they received withholding free, such as investment earnings or prize or gambling winnings.
Why pay estimated taxes? Since the U.S. tax system operates on a pay-as-you-earn (or receive) system, you need to send in quarterly payments to avoid underwithholding and the penalties that come from such oversight.
Most taxpayers will escape this penalty if they end up owing less than $1,000 in tax or if they meet one of two safe harbor payments. The penalty doesn't apply if you pay, via estimated taxes and other methods such as payroll withholding, at least 90 percent of the current year's tax or if your pay at 100 percent of the tax shown on your prior year's tax return, whichever is smaller.
I typically go for the prior year amount because it saves me having to guesstimate how much I'll owe this year.
How can you pay estimated taxes? I just set up my second 1040-ES filing via the Internal Revenue Service's Electronic Federal Tax Payment System, or EFTPS. I've been using this system for years, and I really like it.
The only issue is setting up an account. You can do it online, but then the IRS will send you a PIN number that you need to use it by snail mail. So if you don't have an EFTPS account yet, you can't use this method this time to pay your estimated tax bill. But you can set up an EFTPS account now so you can make futre 1040-ES filings that way.
You also can pay by:
- Credit or debit card. Just remember that the credit card service companies collect fees for sending in your tax money.
- Direct Pay, which will send your money straight from your bank account to Treasury at no charge.
- Mailing via the U.S. Postal Service a check or money order. As long as the envelope is postmarked by the estimated tax filing deadline, you are fine with the IRs.
When do you have to pay estimated taxes? And finally, we get to the reason for this post. Just what is the deadline for making estimated tax payments? The table below has the details:
|Payment #||Due Date||For income received in|
|1||April 15||Jan. 1 through March 31|
|2||June 15||April 1 through May 31|
|3||Sept. 15||June 1 through Aug. 31|
(of the next year)
|Sept. 1 through Dec. 31|
Thanks to EFTPS, Uncle Sam will get his due on my April and May money on June 16.
That's right. Monday, June 16, is the deadline this year since the usual June 15 date, in addition to being Fathers' Day, is on Sunday.
The estimated deadlines follow the same IRS rules when it comes to a due date on a Saturday, Sunday or legal holiday; that is, you have until the next business day to make the payment.
So if you need to make a June estimated tax payment -- and it's not that hard to figure out what you need to pay -- take your extra 24 hours this month and get it right.
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