If you’ve had a big tax debt at the end of last year, your Enrolled Agent may have talked with you about paying estimated taxes, especially if you are self-employed.

Hopefully, your eyes didn’t roll into your head and you didn’t tune him or her out.

Why?

If you do not make them, and you do not pay them, you can get slapped with a penalty.

And if you don’t pay them, and you owe with the return and do not pay the tax then, eventually the IRS will initiate collection activity.

Here’s the catch, though…

Not everyone has to pay estimated taxes. And, if your tax situation changes, you may not know until the end of the year that you should have paid them (or made adjustments to your withholding amounts).

Confusing? It can be. Here’s the breakdown.

We are a pay-as-you-go system.

You must pay what you owe in taxes as you receive your income.

The trouble is that, if you are a sole proprietor, business owner, or independent contractor, you may not know what your income, expenses, deductions and (in some cases) tax bracket until after the end of the year.

For you, instead of having the actual numbers to rely on, you will need to estimate what your income will be as well as what your expenses and other tax deductions (standard or itemized) will be.

Using this information, you can get an idea of your estimated taxes.

Enter a Monkey Wrench

The new Tax Cuts and Jobs Act changed the laws about many deductions – from almost doubling the standard deduction to putting a $10,000 cap on state and local tax deductions.

This can make it difficult to know where you stand.

Because of the new laws, even those with a steady paycheck may not be withholding enough or, conversely, may be handing over too much of an interest-free loan to the government with every paycheck.

There are Penalties at Stake

You probably know that if you don’t pay the right amount of tax, you can get slapped with a penalty… and interest.

Similarly, if you don’t pay your taxes on a timely basis (meaning as you earn income throughout the year) you can get slapped with penalties as well.

Funny though… there is absolutely no penalty for overpaying your taxes. Of course, you are robbing yourself of interest-earning potential on those extra dollars you handed over. Not to mention you could have used that money when the car broke down (or you got sick, or your new puppy chewed up your favorite pair of shoes).

So What can You Do?

Take heart, there is a way to CYA (Cover Your Assets).

You can, generally, do one of the following:

• Pay 90% of this year’s tax bill before the tax deadline, or
• Pay 100% of last year’s tax bill (also before the deadline)

The estimated taxes are due April 15^th, June 15^th, September 15^th, and January 15^th (weekends and holidays not considered).

Another option is to get in touch with an Enrolled Agent who can help make sure you pay the right amount (and only the right amount) of tax at the right time. He or she can also utilize his or her knowledge and expertise to plan your financial moves with an eye toward minimizing your tax bill.

************************************************
Jeffrey Schneider, EA, CTRS, NTPI Fellow has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax Problem Solutions as well as an Enrolled Agent and a Certified Tax Resolution Specialist.
************************************************
Now What? I Got A Tax Notice From The IRS. Help! Defining and deconstructing the scary and confusing letters that land in your mailbox. Jeff defines and deconstructs the scary and confusing letters in a fashion that mixes attention to detail with humor and an intricate clarification of what is what in the world of the IRS.

The book is available in paperback and ebook on https://Amazon.com
************************************************
For more on SFS Tax Problem Solutions, visit: http://sfstaxproblemsolutions.com/
For more on SFS Tax & Accounting Services, visit http://sfstaxacct.com/
************************************************
738 Colorado Avenue Stuart, FL 34994
************************************************
Phone: 772-337-1040
************************************************
https://twitter.com/SFSTaxAcct/
https://linkedin.com/company/sfs-tax-problem-solutions
************************************************