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ESTIMATES & BALANCES DUE

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Estimated Tax Payments - Yes or No?

 

If you have certain types of income that no tax is being withheld from, you probably should be making estimated tax payments!

 

Does your main/only income come from a job where you receive a W-2? If so, this probably doesn't apply to you. However, if you receive any investment, flow-through (from K-1s), or other type of income, you could be subject to large penalties and interest on April 15th if you don't make tax payments as you earn the income!

 

Following are the due dates for estimated tax payments based on the time period
you earned or received the income:

 

Income received from January 1 - March 31: estimated tax payments due April 15

Income received from April 1 - May 31: estimated tax payments due June 15

Income received from June 1 - August 31: estimated tax payments due September 15

Income received from September 1st - December 31: estimated tax payments due January 15

 

California rules for estimate payments are slightly different. To avoid a penalty for California,
you must adhere to the following schedule:

 

30% of the required annual tax payment: estimated payments due April 15

40% of the required annual tax payment: estimated payment due June 15

0% of the required annual tax payment: estimated payment due September 15 (none required)

30% of the required annual tax payment: estimated payment due January 15

 

 

Balance Due - What Should You Do?

 

Dealing with the IRS can be stressful. Owing the tax can be what keeps taxpayers awake at night. Keep in mind, there ARE solutions!  If you owe the IRS money, here are a few options we would like to share with you.

 

  1. Pay them what you can each month and be consistent!
  2. Set up a payment plan with the IRS:
    a. They charge a one-time fee of $105 if you pay by check in doing so, $52 if you allow them to do a direct debit.
    b. Interest and penalties still accrue (Interest right now is 3% daily and penalties are .5% on the tax).
    c. If it is less than $50k, you have 6 years to pay it off.
    d. No financials or bank statements required to submit for approval.

3. Offer in Compromise:

  • Pay less than you owe. Depends on:

i. Value of current assets (house, rentals, boats, vehicles, retirement accounts)

ii. Amount of discretionary income

iii. Ability to pay future income looking at health issues and number of years left to generate income, passive income opportunities

 

  • Must submit financial statements, bank statements and proof of expenses for approval
  • Once the offer is accepted, interest and penalties are no longer accrued
  • Typically will take from 6-8 months or more to go through the process
  • There are several options in payment, but usually the agreed amount is paid soon after the offer is approved in either a lump sum or payments

 

 

Just remember, communication is key! Don't ignore back taxes/notices and end up in a situation where the IRS takes the money right from your bank account. Contact AdminBooks today if you need assistance with IRS representation - we would be honored to help you!

 

 

How Should I Pay Estimates or Balances Due?

To make estimated tax payments, you can use a paper check and send it with Form 1040-ES (or Form 540-ES for California payments). Similarly, you can send a check with Form 1040-V (540-V for California) to pay the balance due with your return, or any outstanding taxes due.

 

Alternatively, there is also the electronic payment option available for both federal and California tax payments. For the IRS, you can enroll with the Electronic Federal Tax Payment System (EFTPS) and make electronic payments quickly and easily, whether for estimated tax payments or balances due with returns. Make sure to enroll first - you cannot use this service without enrolling and receiving a PIN via mail!

 

https://www.eftps.gov/eftps/

For California, you can also make electronic payments using the Web Pay feature on the California Franchise Tax Board website. You do not need to enroll to utilize this service.

https://www.ftb.ca.gov/online/webpay/

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