Some taxpayers may need to make estimated tax payments
Some taxpayers earn income not subject to withholding. For small business owners and self-employed people this can mean making quarterly estimated tax payments.
Anyone in this situation should check their withholding using the Tax Withholding Estimator on IRS.gov. If the estimator suggests a change, the taxpayer can submit a new Form W-4 to their employer.
Here are some important things taxpayers should know about estimated tax payments:
- Taxpayers generally must make estimated tax payments if they expect to owe $1,000 or more when they file their 2020 tax return.
- Aside from business owners and self-employed individuals, people who might also need to make estimated payments include sole proprietors, partners and S corporation shareholders. It also often includes people involved in the sharing economy.
- Estimated tax requirements are different for farmers and fishermen.
- Corporations generally must make these payments if they expect to owe $500 or more on their 2019 tax return.
The remaining deadlines for paying 2020 estimated taxes are September 15, 2020 and January 15, 2021. - Taxpayers can review these forms for help figuring their estimated payments:
- Form 1040-ES, Estimated Tax for Individuals
- Form 1120-W, Estimated Tax for Corporation
- Taxpayers have options for paying estimated taxes. These include:
- Direct Pay from a bank account.
- Paying by credit or debit card or the Electronic Federal Tax Payment System.
- Mailing a check or money order to the IRS.
- Paying cash at a retail partner.
Taxpayers who don’t pay enough tax throughout the year may have to pay an underpayment penalty.
More information:
Publication 505, Tax Withholding and Estimated Tax
Revenue Ruling 2020-18 provides the rates for interest determined under Section 6621 of the code for the calendar quarter beginning October 1, 2020, will be 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments, and 5 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 0.5 percent.
Revenue Ruling 2020-18 will be published in Internal Revenue Bulletin 2020-39 on Sept. 21, 2020
Schutte & Hilgendorf offers a broad range of professional accounting, tax, and audit services to individuals and businesses throughout Yavapai County and Northern Arizona. With over 40 years combined certified public accounting experience, we specialize in providing services to numerous industry specific areas, including non-profit organizations, homeowner’s associations and construction contracting. We also provide tax planning and preparation, sales tax and payroll tax return preparation, ongoing accounting/bookkeeping, live payroll, and QuickBooks setup and training (QuickBooks Proadvisors). Given our small size, we can still provide a personal touch with professional expertise. Come in and see us anytime at 2086 Willow Creek Road, Prescott, Arizona or call us at 928-778-0079.
