What is Estimated Tax:
Estimated tax is the method used to pay tax on income that is not subject to withholding (for example, earnings from self-employment, interest, dividends, rents,alimony, etc.). In addition, if you do not elect voluntary withholding, you should make estimated tax payments on other taxable income, such as unemployment compensation and the taxable part of your social security benefits.
How to pay:
Taxpayers can pay their 2020 estimated taxes electronically anytime, before the end of the tax year. Most taxpayers make estimated tax payments in equal amounts by the four established due dates. IRS provides two free electronic payment options, where taxpayers can schedule their estimated and other federal tax payments up to 30 days in advance, with Direct Pay or up to 365 days in advance, with the Electronic Federal Tax Payment System (EFTPS).
Direct Pay and EFTPS are both free payments options, and taxpayers can schedule their payments in advance and opt in to receive email notifications about the payment.
When to pay:
You can pay all of your estimated tax by April 15, 2020, or in four equal amounts by the dates shown below.
1st payment …………….. April 15, 2020
2nd payment ……………. June 15, 2020
3rd payment …………….. Sept. 15, 2020
4th payment …………….. Jan. 15, 2021*
*You don’t have to make the payment due January 15, 2021, if you file your 2020 tax return by February 1, 2021, and pay the entire balance due with your return. If you mail your payment and it is postmarked by the due date, the date of the U.S. postmark is considered the date of payment. If your payments are late or you didn’t pay enough, you may be charged a penalty for underpaying your tax.
Where to mail payment:
When a Penalty Is Applied:
In some cases, you may owe a penalty when you file your return. The penalty is imposed on each underpayment for the number of days it remains unpaid. A penalty may be applied if you didn’t pay enough estimated tax for the year or you didn’t make the payments on time or in the required amount. A penalty may apply even if you have an overpayment on your tax return. The penalty may be waived under certain conditions. See the Instructions for Form 2210 for details.
As always, should you have any questions or concerns regarding your tax situation please feel free to contact us.
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