On Tuesday, June 8, 2021, the IRS released IR-2021-125, reminding those that pay estimated taxes that payments are due by Tuesday, June 15th .
Estimated tax is the method individual taxpayers, including sole proprietors, partners, and S corporation shareholders use to pay taxes due if amounts are expected to surpass $1.000.00 when returns are filed. Estimated tax payments are based on self-employment, interest, dividends, rent, gains from the sale of assets, awards, and prizes. Should income tax amounts withheld from paychecks, pension, or other income sources not be enough, estimated tax payments are required.
Underpayment penalties can be avoided by owing less than 90% or $1, 000.00 on 2021 tax returns. Farmers, fishermen, casualty and disaster victims, recently disabled taxpayers, and retirees, as well as those who receive sporadic income during a tax year are extended special rules. Additional details, examples, and worksheets will be helpful for these special situations.
The IRS provides a number of tools to assist taxpayers. In addition to Publication 505, Tax Withholding and Estimated Tax, the worksheet in Form 1040-ES, Estimated Tax for Individuals should be reviewed. Generally, taxpayers pay throughout the year, in four equal payments. Corporations are generally required to make estimated tax payments if they expect to owe tax of $500 or more at the time returns are filed. Corporations are expected to pay electronically and should refer to Form 1120-W, Estimated Tax for Corporations for detailed information.
Third quarter payments are due September 15th and the final estimated tax payment for tax year 2021 is due on January 17, 2022.
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