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Six tips on making estimated tax payments

Crunching the Numbers

Some taxpayers may need to make estimated tax payments during the year. Here are some tips on what to consider when deciding if you should.

  1. If you do not have taxes withheld from your income, you may need to make estimated tax payments. This may apply if you have income such as self-employment, interest, dividends or capital gains. It could also apply if you do not have enough taxes withheld from your wages. If you are required to pay estimated taxes during the year, you should make these payments to avoid a penalty.
  2. Generally, you may need to pay estimated taxes in 2020 if you expect to owe $1,000 or more in taxes when you file your federal tax return. Other rules apply, and special rules apply to farmers and fishermen.
  3. When figuring the amount of your estimated taxes, you should estimate the amount of income you expect to receive for the year. You should also include any tax deductions and credits that you will be eligible to claim. Be aware that life changes, such as a change in marital status or a child born during the year, can affect your taxes. Try to make your estimates as accurate as possible.
  4. You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 17 and Sept. 16 in 2020, and Jan. 15, 2021.
  5. You should use Form 1040-ES, Estimated Tax for Individuals, to figure your estimated tax.
  6. You may pay online or by phone. You may also pay by check, credit or debit card or wire transfer. You’ll find more information about your payment options in the Form 1040-ES instructions. Also, check out the payment options here. If you mail your payments to the IRS, you should use the payment vouchers that come with Form 1040-ES. The check should include your social security number and the tax year.

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Also, if your withholding is less than your tax liability each year, you should look at supplementing your withholding with estimated tax payments or making changes to your tax withholdings using the IRS withholding calculator as a guide here.

If you need help with your estimated tax payment, don’t hesitate to contact a Henry+Horne professional adviser.