Tax News: IRS Q4 Estimated Tax Payment Due
Taxpayers who paid too little tax during 2020 can still avoid a tax-time bill and possible penalties by making a quarterly estimated tax payment now, directly to the Internal Revenue Service (“IRS”). The deadline for making a payment for the fourth quarter of 2020 is Friday, January 15, 2021.
Income taxes are pay-as-you-go. This means that by law, taxpayers are required to pay most of their taxes during the year as income is received. There are two ways to do this:
- Withholding from paychecks, pension payments, Social Security benefits or certain other government payments including unemployment compensation in some cases. This is how most people pay most of their tax.
- Making quarterly estimated tax payments throughout the year to the IRS. Self-employed people and investors, among others, often pay tax this way.
Either method can help avoid a surprise tax bill at tax time and the accompanying penalties that often apply. If a taxpayer failed to make required quarterly estimated tax payments earlier in the year, making a payment to cover these missed payments, as soon as possible, will usually lessen and may even eliminate any possible penalty.
Taxpayers can check their possible tax liability by using the IRS Tax Withholding Estimator.
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