Many individuals pay estimated taxes throughout the year. For many more, they may not know they can pay them as well and save money. If you’re not sure what estimated taxes are, they are a way for you to pay in for any taxes you may owe, that are not subject to payroll withholding taxes. Estimated taxes are paid on a quarterly basis. Typically April 15th, June 15th, September 15th and January 15th.
How do I know if I need to pay estimated taxes?
Not every American needs to pay estimated taxes. It all depends on your situation. If you fall under one of these categories, you need to consider paying estimated taxes:
- You’re a partner or business owner
- You’re a 1099 employee, also considered a subcontractor
- You owe more than $1,000 in taxes each year.
Note: If you fall under any of the above categories, and you don’t have an accountant handle your tax return, you may want to reconsider. Accountants have the knowledge to make sure your taxes are being filed correctly, and you’re getting the max deductions that you can. Consider reaching out to us today if you’re looking for an accountant to handle your business or personal tax returns.
How much will my estimated payments be?
This is where your accountant comes into play. They will use your tax information from the previous year to determine what your estimated payments will be for the current year. Whatever you contribute in these payments throughout the year will be applied to your next tax return. This will help reduce a large tax bill come tax season.
What are the benefits for paying estimated tax payments?
There are two big benefits for paying estimated.
- You’ll save money. If you wait until the next tax season to pay that large tax bill, chances are you may not be able to pay that large bill at one shot. So, you will not only be socked with penalties for waiting to pay until tax season, but you will also be socked with additional penalties if you don’t send you payment in on time, or if you have to set up a payment plan.
- You won’t have such a large bill. By paying estimated, even if you still owe money come tax time, it will not be as large as if you don’t pay in advance. That typical large bill you would receive is split evenly into four payments for you to pay throughout the year. This gives you the ability to pay them without having that one large bill.
If you would like to learn more about estimated taxes, or maybe you want to discuss your situation and find out if paying estimated would benefit you, give us a call. We are here to help you with all of your tax needs!
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