August is the perfect time to make sure that you are paying enough to cover your tax liability, whether through estimated tax payments or through payroll withholding. There is still plenty of time left in the year to make any necessary corrections in order to avoid surprises when you file your 2022 tax return. Below is some information regarding estimated tax payments and tools produced by the IRS to guide you in this process.
The IRS allows you to pay your taxes in two different ways. The first option is by withholding money from your paychecks, pension, or payments like Social Security. The second option is to make estimated tax payments on a quarterly basis throughout the year.
How do I know when I should update my withholding?
The amount that you owe in taxes can fluctuate based on major life changes, such as marriage and divorce, working a second job, running a side business, or receiving additional income. If any of these have been part of your life this year, it’s a good idea to re-evaluate your withholding. If you want to make any changes, you can fill out a new Form W-4 and submit it to your employer.
To help you figure out the correct tax withholding for you, the IRS provides a Tax Withholding Estimator.
Should I make estimated tax payments?
Estimated taxes should be paid on income that is not subject to payroll taxes, such as self-employment income. You can make quarterly estimated tax payments by mailing a check and including the Form 1040-ES in the envelope, or you can also make payments online through the IRS website.
The due dates for estimated tax payments are as follows:
- April 15: payment for the first quarter (January 1 to March 31)
- June 15: payment for the second quarter (April 1 to May 31)
- September 15: payment for the third quarter (June 1 to August 31)
- January 15: payment for the fourth quarter (September 1 to December 31 of the preceding year)
Visit the IRS website for publications, forms, and more information about withholding and estimated taxes. As always, be sure to contact Ryder and Company with any of your questions as we lead up to tax season!