06/08/2022
For those who pay estimated taxes, second quarter June 15 deadline approaches
WASHINGTON — The Internal Revenue Service reminds taxpayers who pay estimated taxes that the deadline to pay their second quarter tax liability is June 15.
Taxes are pay-as-you-go
This means taxpayers need to pay most of the tax they expect to owe during the year, as income is received. There are two ways to do that:
Withholding from pay, pension or certain government payments such, as Social Security.
Making quarterly estimated tax payments during the year.
Estimated tax is the method used to pay tax on income that isn’t subject to withholding. This includes income from self-employment, interest, dividends, rent, gains from the sale of assets,
prizes and awards.
Taxpayers may also have to pay estimated tax if the amount of income tax being withheld from their salary, pension or other income isn’t enough. If necessary, those who receive a salary or wages can avoid having to pay estimated taxes by asking their employer to withhold more tax from their earnings. To do this, taxpayers should submit a new Form W-4 to their employer. There is a special line on Form W-4 for them to enter the additional amount they want their employer to withhold.
Who must pay estimated tax?
Individuals, including sole proprietors, partners and S corporation shareholders, generally have to make estimated tax payments if they expect to have a tax liability of $1,000 or more when they file their return.
Individual taxpayers can use the IRS Interactive Tax Assistant online to see if they are required to pay estimated taxes. They can also see the worksheet in Form 1040-ES, Estimated Tax for Individuals, for more details on who must pay estimated tax.
Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when they file their return. Corporations can see Form 1120-W, Estimated Tax for Corporations, for more information.
Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.
How to avoid an underpayment penalty
Taxpayers can avoid an underpayment penalty by owing less than $1,000 at tax time or by paying most of their taxes during the year. Generally, for 2022 that means making payments of at least 90% of the tax expected on their 2022 return, or taxpayers who pay at least 100 percent of the tax shown on their return for tax year 2021.
Special rules apply to some groups of taxpayers, such as farmers, fishers, certain higher income taxpayers, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. For more information, refer to Form 1040-ES.
Generally, taxpayers should make estimated tax payments in four equal amounts to avoid a penalty. However, if they receive income unevenly during the year, they may be able to vary the amounts of the payments to avoid or lower the penalty by using the annualized installment method. Taxpayers can use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if they owe a penalty for underpaying their estimated tax.
Third quarter payments are due September 15 and the final estimated tax payment for tax year 2022 is due on Jan. 17, 2023.
