The Internal Revenue Service ("IRS") announced a reminder that the self-employed, investors, retirees and others with income not subject to withholding that third quarter estimated tax payments for 2020 are due September 15.
Taxes are paid as income is received during the year through withholding from pay, pension or certain government payments such as Social Security or unemployment; and/or making quarterly estimated tax payments.
Who Should Pay Quarterly?
Individuals, including sole proprietors, partners and S corporation shareholders, generally make quarterly estimated tax payments if they expect to owe $1,000 or more when their tax return is filed. Taxpayers with income not subject to withholding, including interest, dividends, capital gains, alimony and rental income, normally make estimated tax payments.
Penalty for Underpayment
If a taxpayer underpaid their taxes, they may have to pay a penalty. This applies whether they paid through withholding or through estimated tax payments. A penalty may also apply for late estimated tax payments even if someone is due a refund when they file their tax return.
In general, taxpayers don't have to pay a penalty if they meet any of these conditions:
- They owe less than $1,000 in tax with their tax return.
- Throughout the year, they paid the smaller of these two amounts:
- at least 90% of the tax for the current year
- 100% of the tax shown on their tax return for the prior year – this can increase to 110% based on adjusted gross income
To see if they owe a penalty, taxpayers should use Form 2210. The IRS may waive the penalty if someone underpaid because of unusual circumstances and not willful neglect. Examples include:
- casualty, disaster or another unusual situation.
- an individual retired after reaching age 62 during a tax year when estimated tax payments applied.
- an individual became disabled during a tax year when estimated tax payments applied.
For any questions or concerns, please contact the Tax Attorneys at Fazzio Law, we are in your corner!
To reply to this message, enter your reply in the box labeled "Message", hit "Post Message."