Here’s what taxpayers should know about making 2019 estimated tax payments

August 24, 2019

Just a reminder that 3rd quarter estimated taxes are due September 15th, 2019.

Small business owners, self-employed people, and some wage earners should look into whether they should make estimated tax payments this year. Doing so can help them avoid an unexpected tax bill and possibly a penalty when they file next year.

Everyone must pay tax as they earn income. Taxpayers who earn a paycheck usually have their employer withhold tax from their checks. This helps cover taxes the employee owes. On the other hand, some taxpayers earn income not subject to withholding. For small business owners and self-employed people, that usually means making quarterly estimated tax payments.

Here’s some information about estimated tax payments:

  • Taxpayers generally must make estimated tax payments if they expect to owe $1,000 or more when they file their 2019 tax return.
  • Whether or not they expect to owe next year, taxpayers may have to pay estimated tax for 2019 if their tax was more than zero in 2018.
  • Wage earners who also have business income can often avoid having to pay estimated tax. They can do so by asking their employer to withhold more tax from their paychecks. The IRS urges anyone in this situation to do a Paycheck Checkup using the Tax Withholding Estimator on IRS.gov. If the estimator suggests a change, the taxpayer can submit a new Form W-4 to their employer.
  • Aside from business owners and self-employed individuals, people who need to make estimated payments also includes sole proprietors, partners and S corporation shareholders. It also often includes people involved in the sharing economy.
  • Estimated tax requirements are different for farmers and fishermen.
  • Corporations generally must make these payments if they expect to owe $500 or more on their 2019 tax return.
  • Aside from income tax, taxpayers can pay other taxes through estimated tax payments. This includes self-employment tax and the alternative minimum tax.
  • The final two deadlines for paying 2019 estimated payments are Sept. 16, 2019 and Jan. 15, 2020.
  • Taxpayers can check out these forms for details on how to figure their payments:
  • Taxpayers can visit IRS.gov to find options for paying estimated taxes. These include:
  • Anyone who pays too little tax through withholding, estimated tax payments, or a combination of the two may owe a penalty. In some cases, the penalty may apply if their estimated tax payments are late. The penalty may apply even if the taxpayer is due a refund.
  • For tax year 2019, the penalty generally applies to anyone who pays less than 90 percent of the tax reported on their 2019 tax return.
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Get Ready for Taxes:

December 5, 2018

Safekeeping tax records helps for future filing, amended returns, audits

WASHINGTON — With the tax filing season quickly approaching, the Internal Revenue Service wants taxpayers to understand how long to keep tax returns and other documents.

This is the seventh in a series of reminders to help taxpayers Get Ready for the upcoming tax filing season. The IRS has recently updated its Get Ready page with steps to take now for the 2019 filing season.

The IRS generally recommends keeping copies of tax returns and supporting documents at least three years. Employment tax records should be kept at least four years after the date that the tax becomes due or paid, whichever is later. Tax records should be kept at least seven years if a return claims a loss from worthless securities or a bad debt deduction. Copies of previously-filed tax returns are helpful in preparing current-year tax returns and making computations if a return needs to be amended.

Safe-keeping records

Tax records should be kept safe and secure regardless of whether they are stored on paper or kept electronically. Paper records should be kept in a secure location, preferably under lock and key, such as a secure desk drawer or a safe. Records retained electronically should be backed up electronically and encrypted when possible. The IRS also suggests scanning paper tax and financial records into a format that can be encrypted and stored securely on a flash drive, CD or DVD with photos or videos of valuables.

Disposing of records

Tax records contain sensitive data such as Social Security numbers, income amounts and bank account information. Tax documents not properly disposed of can land in the hands of criminals and lead to identity theft. Once past their useful date, records should be disposed of properly. Paper tax returns and supporting documents should be shredded before being discarded. Old computers, back-up drives and media contain sensitive data. Deleting stored tax files will not completely erase them. Using special wiping software ensures the removal of sensitive data.

Taxpayers still keeping old tax returns and receipts stuffed in a shoebox may want to rethink their approach. When records are no longer needed the data should be properly destroyed. More information is available on IRS.gov at How long should I keep records?


Tool on IRS.gov helps taxpayers research charities before making donations

December 3, 2018

When people are done giving thanks at the dinner table, many start another kind of giving. The annual Giving Tuesday happens the week after Thanksgiving to kick off the season of charitable giving. This year, Giving Tuesday falls on Tuesday, November 27.

Taxpayers may be able to deduct donations to tax-exempt organizations on their tax return. As people are deciding where to make their donations, the IRS has a tool that may help. Tax Exempt Organization Search on IRS.gov is a tool that allows users to search for charities. It provides information about an organization’s federal tax status and filings.

Here are four facts about the Tax Exempt Organization Search tool:

  • Donors can use it to confirm an organization is tax exempt and eligible to receive tax-deductible charitable contributions.
  • Users can find out if an organization had its tax-exempt status revoked. A common reason for revocation is when an organization does not file its Form 990-series return for three consecutive years.
  • EO Select Check does not list certain organizations that may be eligible to receive tax-deductible donations, including churches, organizations in a group ruling, and governmental entities.
  • Organizations are listed under the legal name or a “doing business as” name on file with the IRS. No separate listing of common or popular names is searchable.

Taxpayers can also use the Interactive Tax Assistant, Can I Deduct my Charitable Contributions? to help determine if a charitable contribution is deductible.

Taxpayers may also want to decide now if they’ll itemize their deductions when they file next year. Last year’s tax reform legislation made changes to the standard deductions and itemized deductions. Many individuals who formerly itemized may now find it more beneficial to take the standard deduction. So, taxpayers should check their 2017 itemized deductions to make sure they understand what these changes mean to their tax situation for 2018. More information about these changes is on IRS.gov/taxreform.


IRS issues proposed regulations on new 20 percent deduction for passthrough businesses

August 8, 2018

WASHINGTON — The Internal Revenue Service issued proposed regulations today for a new provision allowing many owners of sole proprietorships, partnerships, trusts and S corporations to deduct 20 percent of their qualified business income.

The new deduction — referred to as the Section 199A deduction or the deduction for qualified business income — was created by the Tax Cuts and Jobs Act. The deduction is available for tax years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file next year.

The deduction is generally available to eligible taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers. It’s generally equal to the lesser of 20 percent of their qualified business income plus 20 percent of their qualified real estate investment trust dividends and qualified publicly traded partnership income or 20 percent of taxable income minus net capital gains.

Deductions for taxpayers above the $157,500/$315,000 taxable income thresholds may be limited. Those limitations are fully described in the proposed regulations.

Qualified business income includes domestic income from a trade or business. Employee wages, capital gain, interest and dividend income are excluded.

In addition, Notice 2018-64, also issued today, provides methods for calculating Form W-2 wages for purposes of the limitations on this deduction. More information may be found at www.IRS.gov.

Taxpayers may rely on the rules in these proposed regulations until final regulations are published in the Federal Register.

Written or electronic comments and requests for a public hearing on this proposed regulation must be received within 45 days of publication in the Federal Register.


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