Paying quarterly estimated taxes
Summer has definitely arrived, but there's no tax vacation for some folks.
If you must make estimated tax payments, you're going to have to take a break from poolside lounging long enough to fulfill your IRS obligations that are due in just a few days.
Estimated tax filings usually are due the 15th of each April, June, September and January, except when that date falls on a weekend or holiday. The June one is for money you earned in April and May that didn't have income tax withheld.
Estimated tax payments are the bane of an increasing number
of Americans. They are expected from people who make money
on investments, operate their own businesses or get any extra cash
that has not yet been taxed.
Yes, nobody really likes doing taxes more than once a year.
Confusing? Sometimes, especially
if you're earning income from several different sources at different
Necessary? You bet, or you
could end up owing Uncle Sam penalties and interest.
The reason behind estimated
Most people meet
their tax obligations through paycheck
If you're self-employed,
either as your main job or
as a sideline, you must get
the taxes on this money to
the IRS yourself by filing
Estimated taxes also are due
on interest and dividends,
profits from investment sales,
alimony, rental income and
prizes or awards.
tax system was designed to
ensure that taxpayers who
have a lot of nonwithholding
income pay into the tax system
regularly. This evens things
out between these taxpayers
and wage earners who lose
a chunk of money each paycheck
The problem, says Linda Durand, a certified public accountant with Drolet & Associates PLLC in Washington, D.C., is that too many folks who have a windfall get excited about the extra cash and immediately spend the proceeds without any thought to the tax implications. Even people who earn a steady stream of money that isn't taxed upfront put off filing estimated taxes because they want or need the cash now. They figure they'll make it right with Uncle Sam come April 15.
That's not a good idea. If
you end up owing $1,000 or more in April, you might have underpaid your tax bill. That would open the door for the IRS to add penalties
and interest for not paying tax on your earnings
as you got them.
Updated: June 12, 2009