A monthly tax guide, such as the 2018 withholding tables, can provide more than just basic information any taxpayer needs to know when paying taxes. It can also prevent any individual or corporation from incurring a penalty due to unpaid taxes. This includes late payments for taxes, even if a refund is already due when you file a tax return. Consider the resources below to learn how to make tax payments easier!
Monthly Tax Guide: How To Pay Taxes More Efficiently
1. Who Pays the Estimated Tax?
Any individual which includes sole proprietors, shareholders of an S corporation, and partners, need to make an estimated tax payment. This is if they expect to owe a tax of $1,000 and more upon filing for return. For corporations, they need to make payments for estimated tax if they are expecting to owe a $500 tax when filing for return.
An individual also needs to pay an estimated tax for the current year if your tax last year is above zero. For more information on who pays the estimated tax, you can download the worksheets provided by the IRS such as the Form 1040-ES, the Estimated Tax for Individuals and Form 1120-W, and Estimated Tax for Corporations.
2. Who is Not Required to Pay the Estimated Tax?
If you’re receiving wages and salaries, you don’t need to pay an estimated tax. You may do this by asking your employer to withhold a higher amount of tax from your salary or earnings. You will also need to file with your employer a new Form W-4. This form has a special line where you can indicate the additional amount you wish to be withheld by your employer.
If you also meet the following criteria, you are exempted from paying your estimated tax for the current year:
- Didn’t incur any tax liability last year
- A resident or a U.S. citizen for a whole year
- The period for the last tax year covered 12 months
3. How Do You Determine the Estimated Tax?
To get the estimated tax, you can use Form 1040-ES. The estimated tax computation includes the adjusted amount you expect for your gross income, taxes, and deductions. You also need to figure out the taxable income as well as the credits for that year. Including your income, credits, and deductions from last year as your starting point can also help you figure out how much your estimated tax is for the current year. The best guide you can use for this is your federal tax return from the previous year.
In cases where your estimate for your earnings is high, you can refigure the estimated tax in the following quarter by filling out another Form 1040-ES worksheet. Do take note to keep your income estimate as accurate as possible to avoid any penalties. Corporations get their estimated tax through the Form 1120-W.
4. When Can You Pay the Estimated Taxes?
There are four payment periods in a year when it comes to paying the estimated tax. You also have an option to pay the estimated taxes weekly, biweekly, monthly, etc. Just make sure you have paid in full by the end of each quarter.
5. What is the Penalty for an Estimated Tax Underpayment?
If you’re unable to make payments for the current year either in your withholding or estimated taxes, you will need to pay a penalty. If you owe $1,000 less in tax after deducting the credits and withholdings, you might want to avoid getting a penalty. For farmers and fishermen, the IRS has special rules which are indicated in Publication 505, Tax Withholding and Estimated Tax.
If in cases where your regular income is fluctuating, you can avoid getting a penalty or lower it down when you annualize your income and make unequal payments. To know if you owe a penalty because of estimated tax underpayment, you can use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts or Form 2220, Underpayment of Estimated Tax by Corporations.
6. How Do You File?
Included in the monthly tax guide is the easiest option to pay federal taxes for both the individuals and businesses in the EFTPS (Electronic Federal Tax Payment System). You can pay all your federal tax payments using this including the FTDs (federal tax deposits), the estimated tax payments, and the installment agreement. With the EFTPS, you have access to your payment history which shows you when and how much you paid for your estimated taxes.
7. Where Do You File?
For every period, a taxpayer has several options to choose from such as paying online, by phone, or through email. You can see this in the “How to Pay Estimated Tax” section of the Form 1040-ES. When filing for tax returns with or without a payment, there are specific addresses listed for every state for individuals, corporations, as well as government entities.
Having a monthly tax guide such as the employer’s tax guide 2018 will make sure you’re on the right track in paying due taxes. This will also enable you to know your rights as well as the limitations and special cases included for a particular taxpayer may you be an individual, a business, a corporation or a government entity. Having a federal withholding calculator can also help you determine and pay the right amount. This will lessen all the hassle you have to go through when it comes to your time, effort, and money.
Do you have other concerns regarding the monthly tax guide not listed here? Please share them in the comments section below.