However, if your income is received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments. Pursuant to Notice PDF , the due date for your first estimated tax payment was automatically postponed from April 15, , to July 15, Likewise, pursuant to Notice , the due date for your second estimated tax payment was automatically postponed from June 15, , to July 15, The IRS lowered to 80 percent the threshold required for certain taxpayers to qualify for estimated tax penalty relief if their federal income tax withholding and estimated tax payments fell short of their total tax liability in In general, taxpayers must pay at least 90 percent of their tax bill during the year to avoid an underpayment penalty when they file.
On January 16, , the IRS lowered the underpayment threshold to 85 percent and on March 22, , the IRS lowered it to 80 percent for tax year This additional expanded penalty relief for tax year means that the IRS is waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.
Taxpayers who have not filed yet should file electronically. The tax software was updated and uses the new underpayment threshold and will determine the amount of taxes owed and any penalties or waivers that apply. This penalty relief is also included in the revision of the instructions for Form , Underpayment of Estimated Tax by Individuals, Estates, and Trusts.
Taxpayers who have already filed their federal tax return but qualify for this expanded relief may claim a refund of any estimated tax penalty amount already paid or assessed. Taxpayers cannot file this form electronically. More In File. Who Does Not Have To Pay Estimated Tax If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings.
You had no tax liability for the prior year You were a U. When To Pay Estimated Taxes For estimated tax purposes, the year is divided into four payment periods. The penalty may also be waived if: The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or You retired after reaching age 62 or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.
Expanded penalty waiver available if tax withholding and estimated tax payments fell short; refund available for those who already paid underpayment penalty The IRS lowered to 80 percent the threshold required for certain taxpayers to qualify for estimated tax penalty relief if their federal income tax withholding and estimated tax payments fell short of their total tax liability in For Simple Tax Returns Only.
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Skip To Main Content. Step 1: Look into abatement Check whether your circumstances could entitle you to abatement. Tips If you run a small business and the employee responsible for filing your tax returns and making payments quits, this may be a valid reason to obtain a penalty waiver if it's close to the payment deadline.
In some cases, relying on an accountant's advice that was wrong may be sufficient for the IRS to eliminate your penalties. And checking and adjusting your withholding now can help prevent an unexpected tax bill and penalties next year at tax time. The IRS Withholding Calculator and Publication , which is entitled, Tax Withholding and Estimated Tax, can help determine if you need to adjust your withholding or make estimated or additional tax payments now.
And you can also find Publication on the IRS website. You just key-in "Pub, P-u-b, " in the search box. You just key in, "Withholding" and it will take you right to a page that has a link to the IRS Withholding Calculator. Thank you, so much. The IRS Withholding Calculator is an online tool that helps you determine the correct number of withholding allowances to enter into your Form W-4, and that's the Employee's Withholding Allowance Certificate and any additional amount, if any, to withhold from each paycheck.
But primarily designed for employees who receive wages, the Withholding Calculator can also be helpful to some recipients of pension and annuity income. To use the IRS Withholding Calculator most effectively, be sure to have on hand a copy of your latest tax return, along with your most recent paystub.
After inputting all the required information, the Withholding Calculator will recommend the number of allowances you should claim on your W If the Withholding Calculator suggests a change, you should fill out a new Form W-4 which is an Employee's Withholding Allowance Certificate and give it to your employer. Remember don't send the W-4 to the IRS, give it to your employer.
The Withholding Calculator is pretty easy to use, and the process doesn't really take all that long, but please make sure to read and follow the Withholding Calculator instructions. Taxpayers who expect to receive long term capital gains, qualified dividends or taxpayers who owe self-employment tax, the alternative minimum tax or tax on unearned income of minors should use the instructions in Publication , that's the withholding and estimated tax guide to check to see whether they should change their withholding or make estimated tax payments.
If a taxpayer has self-employment income or owes self-employment tax they should use the worksheets in Publication , again that's the "Tax Withholding and Estimated Tax" guide to determine if they should pay estimated tax.
Well, as we've previously pointed out, you may be able to adjust your withholding to cover your pay-as-you-go federal tax requirement. However, there are some taxpayers that may need to make estimated tax payments to meet their pay-as-they-you-go requirement.
So, who must make estimated tax payments? Well most often, self-employed people, including some persons involved in the sharing or "gig" economy, for example, ride share drivers, may need to pay estimated tax. And similarly, investors, retirees and others, a substantial portion of whose income is not subject to withholding, often need to make estimated tax payments as well.
Now, besides self-employment income, other income generally not subject to withholding would include interest and dividends, capital gains, rental income, prizes. And you may also want to make estimated tax payments to avoid penalties if the amount of income being withheld from your salary, or your pension or other income is not enough to cover your income tax for the year. So, to get more information, visit our IRS website. Just go to IRS. And as you can see, there is a wealth of information available on our IRS.
Remember you can download a copy of this IRS Resources document by clicking on the "Materials" button on the left side of your screen. And with that, I'll turn it over to Phillip.
Before we begin, our question and answer session, I do want to mention that we might not have time to answer all the question submitted today during today's webinar however let me assure you that we will answer as many as time allows. Also, I want to remind you that if you're participating to earn a certificate and related continuing education credit, that you will qualify by participating for at least 50 minutes, that's minutes from the official start time of this webcast that means the first 5 minutes, 7 minutes of "chatting" we engaged in before the top of the hour that won't count towards the 50 minutes, sorry about that.
So as long as you meet the , minute threshold, you're not required to stay on for the question and answer portion. But, of course, we certainly hope you will. Because we've got quite a few questions that I think, um, would be beneficial to hear from Joe and Jennifer.
So, Joe and Jennifer, I hope you're ready. We have received quite a few questions. So, let's get started right away so that we can get to as many of these questions as possible. Let's go ahead and start with Jennifer. Got a couple of questions here that I am going to throw at you, um, if you are ready.
I am off mute. What are the user fees? Um, one person writes in here what are the user fees for setting up an individual payment plan with the IRS? I know you talked about that a little bit, but I'm not sure you heard anything about user fees.
Now for a long-term installment agreement payment plan, which is paying more than days, it depends on the payment method and also, whether you use the online payment agreement application. So, what we have learned here is if you can, you want to use the Online Payment Agreement and opt for direct debit.
That's the easiest and also the least expensive as far as user fees. We've got to say OPA more often. So, um, if you can, if you can access it and do it online, you're going to save some money on user fees, that's what I'm hearing you say. And you, you, if you do direct debit and it is just set up and then it automatically happens, and you don't have to worry about being late. Tell me some of the differences between these two fantastic online payment options.
They're both fantastic payment options, but there are differences. So, there's actually several differences. Um, remember though, you can use EFTPS to pay any kind of federal tax, okay, including individual and business taxes such as estimated taxes, excise taxes, payroll taxes, and even corporate taxes with EFTPS, right.
IRS Direct Pay is only available to make payments on your individual taxes. Such as your, your Form, right, and your extensions, your individual tax bill and installment agreement.
I think that's a big difference, right there. I mean that's great. Joe pointed out, you know just go ahead and schedule all four quarterly estimated tax payments at one sitting and then be done with it. That's fabulous. Very good. Eastern Time the day before the payment is due, with IRS Direct Pay, you can make a same day payments, okay, same day payments, which is great.
Let me turn it over to you, Joe. Um, filing, when you e-file your return, how, how do you file on one date and pay on another? There, there needs to be some clarification on that because we had a couple of questions on that. Basically, when you're using a tax software program, the tax software program is going to be asking you those things so I can't give you, you know, a step-by-step instruction on how to do that because tax software varies from, um, supplier to supplier, but in each case, they will offer you that option if you want to do electronic fund withdrawal, to pick the date you actually want the amount to come out of your checking or savings account and be transmitted to the U.
So, it depends on software and your tax professional if you're an individual is going to know that in most of our tax professionals know how their software works so that's great. So, Joe, let me keep this with you. If someone owes money from and he's going to have a balance due this year, can you consolidate both balance dues automatically or does it have to have another installment? Let me turn it over to you. Um, once you, if you have an installment agreement in effect and another tax liability comes up, that installment agreement, automatically its terminated and you have to redo, or you have to apply for a new one.
The only way possibly around that, it depends on who you're dealing with, if you are dealing with a Collections Officer or if you just need an online payment agreement, An online payment agreement you'll probably have to create a new one if you're dealing with a Collections Officer, you might be able to modify one that you already have in place.
But, generally speaking, it is going to terminate and you're going to have to apply for a new one. Let me ask you, one more.
If you're getting a refund, you know you're getting a refund this year, do you still get a late filing penalty if you file late? The reason being is a late filing penalty is based on the amount of tax that you owe. And if you don't owe any taxes and get a refund, there would be no penalty. However, what if there is an assessment later and you file that late and you do owe? Wow, Joe and Jennifer, thank you, so much.
I'm getting the wrap up here from my producer. So, um, I can't thank you enough for such an excellent job, um, on, on, reminding some of us that know the stuff, the importance of it and we really appreciate your efforts here today, um, but before we close this session, I am going to ask you each to, to share with us what are some of the most important points that we want our audience to remember from today's web conference.
Joe, why don't you go first. File your tax return on time and then pay as much as you can before the due date of the return. By filing your tax return and paying your taxes on time, you're going to avoid a late filing penalty and late payment penalties as well as interest charges. If you can't file your tax returns on time, you can apply for an automatic six-month extension to file your tax return. However, an extension to file is not an extension to pay your taxes.
So, it's very important to remember that. Jennifer, I'm going to hand it over to you. And remember there are several payment options available for paying your taxes and you should explore all of your payment options at our IRS website. Again, just click the "Pay" navigational tab or visit IRS. And if you can't pay right away, the IRS will work with you to resolve your tax debt.
Remember, most people qualify to set up a payment plan using the Online Payment Agreement tool. And in order to help prevent owing tax, or a large tax bill next year, use the IRS Withholding Calculator to find out how much federal income tax should be withheld from your pay.
And you can use the worksheets in IRS Publication to calculate any estimated tax payments you may be required to make. And Phil, back to you. For those of you in the audience that have attended today for at least 50 minutes after the official start time at the top of the hour of the webinar, you'll receive a certificate of completion that you can use with your credentialing organization for possible CE credit.
Team I know that's a long one irs. Now if you want to know who your local Stakeholder Liaison is, um, you can send us an e-mail using this address as well on the slide and we'll send you that information. Or you can't find a contact for your state by visiting, you can find a contact for your state by visiting IRS. Ladies and gentlemen, as part of the Service's efforts to provide you with timely topics and interesting speakers, we'd appreciate if you'd take just a few minutes to complete a short evaluation before you exit.
We will capture those. Click the "Survey" button on the left side of your screen to begin. And again, if it doesn't come up, don't forget to hit that pop-up blocker so it does. We hope that you'll join us for future webinars as they become available; the great part is that they are informative and they're free. You know what it is like, if they're free it's me. So, um, click on IRS. So, I hope to see you there. Please take a look to your local Stakeholder Liaison for information about the policies, practices and procedures that the IRS uses to ensure compliance with the tax laws.
Um, it has been a pleasure to be with you here today, folks. Thank you and on behalf of the Internal Revenue Service, I'd like to thank you for attending today's webinar. It's important for us to maintain strong partnerships with the tax professional community as well as industry organizations and other federal, state, and local government organizations.
You make our job a lot easier by sharing information that allows for proper tax reporting. Thanks again for your time and attendance. Much success in your business or practice. Feel free to exit the webinar at this time. Normal mode. Edit mode. Check System. Send us your comment! Share this presentation. Share the current section. Outline Transcript Links Bios show diag. Help Normal mode. Your comment will be read by our web staff, but will not be published. Copy and paste the following URL to share this presentation.
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