Now is the time to make your estimated tax payment Despite the individual tax filing due date being delayed until May 17, 2021, there is no delay in paying first quarter estimated tax payments for the 2021 tax year. So it is time to review your tax situation for the 2021 tax year and make an estimated quarterly tax payment using Form 1040-ES. First quarter due date: Thursday, April 15, 2021 You are required to withhold or prepay throughout the 2021 tax year at least 90 percent of your 2021 total tax bill, or 100 percent of your 2020 federal tax bill.* A quick look at your 2020 tax return and a projection of your 2021 tax obligation can help determine if a quarterly payment might be necessary in addition to what is being withheld from any paychecks. Here are some things to consider: Underpayment penalty. If you do not have proper tax withholdings throughout the year, you could be subject to an underpayment penalty. A quick payment at the end of the year may not be enough to avoid the underpayment penalty. W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 wage withholdings to make up the difference. Self-employed. In addition to paying income taxes, self-employed workers must also account for paying Social Security and Medicare taxes. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter to pay your estimated taxes. Use your refund? An alternative option to pay your 2021 first quarter estimated tax is to apply some or all of your 2020 tax refund. ALERT! The tricky part of this approach in 2021 is with the individual tax filing due date being delayed until May 17, 2021, the IRS hasn't announced whether it will apply a penalty to 2020 refunds applied to 2021's tax obligation as a first quarter payment if made after April 15. Pay more in the first quarter. By paying a little more than necessary in the first quarter, you can be in a position to adjust future estimated tax payments downward later in the year if your 2021 tax obligation appears like it will be lower than you originally thought. Not sure if you need to make a quarterly payment? Take a quick look at your 2020 tax return to see the amount of tax you paid. Divide the tax by the number of paychecks for the year. Is enough being withheld from your paycheck? Consider adjusting your withholdings with your employer if you think it is necessary to cover your 2021 tax bill. *If your income is more than $150,000 ($75,000 if married filing separate), you must pay 110 percent of your 2020 tax obligation to be safe from an underpayment penalty on your 2021 tax return. "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Monarch Accounting Group, Inc 145 Tower Drive, Suite 4 Burr Ridge, IL 60527 Phone (630) 320-3720
0 Comments
Your comment will be posted after it is approved.
Leave a Reply. |
BLOGTo better serve our clients and friends, to keep you up-to-date and informed, our blog is a resource for tax tips and overall accounting related articles. We hope you find this useful! CATEGORIES
All
ARCHIVES
May 2023
|