Estimated tax can be used to pay taxes on income that is not subject to withholding. What happens if you decide not to voluntarily withhold? On additional federal taxable income, such as unemployment benefits and the taxable portion of your social security benefits, you will subsequently be obliged to make anticipated tax payments. The IRS’s yearly timetable calls for four equal tax payments, which are the norm. Despite the fact that they are commonly referred to as quarterly payments, they are not always payable at intervals of three months or on revenue for an entire year.
Self-employed or contract employees or independent contractors are typically required to make anticipated payments through 2022. Similar to this, since a large portion of their income is not subject to withholding, retirees, investors, and other people regularly need to make these payments.
Most of the time, when quarterly anticipated tax payments are fulfilled, fines are reduced or even eliminated. Farmers and fishermen, victims of accidents and disasters, people who have recently become crippled, retirees, and people whose income is dispersed erratically throughout the year are all exempt from the penalty and are subject to certain requirements. Various lists of anticipated tax payments for 2022 are shown below.
The following are the steps to pay estimated taxes
Taxpayers can use a 1099 tax calculator or the instructions in the publication Estimated Tax for Individuals to calculate their quarterly taxes. Taxpayers can view their payment history, pending charges, and other useful tax data on this page.
IRS Direct Pay, a debit card, credit card, a digital wallet, and the Treasury Department’s Electronic Federal Tax Payment System are just a few of the ways that taxpayers can pay their expected taxes. Whether you are paying with cash or a check, make sure to make the check payable to the US Treasury. More information, spreadsheets, and examples are provided in Publication 505, Tax Withholding and Estimated Tax. This book should be especially useful if you have dividend or capital gain income, owe AMT or self-employment tax, or are in another exceptional circumstance.
Pay your expected taxes
Your expected tax costs can currently be calculated using Form 1040-ES. Before determining your predicted adjusted gross income, determine your expected taxable income, taxes, self-employed tax deductions, and credits (such as the education tax credit) for the entire year. Advice on the worksheet is provided for Form 1040-ES. Additionally, you might be able to get a general idea from your tax return from the previous year. You eventually require an anticipated figure for your projected year revenue.
If you determined that your initial estimate of tax was too high, use a different IRS Form 1040-ES worksheet to calculate your estimated 1099 tax. Additionally, if your circumstances change or a change in tax law affects it, you must recalculate your tax obligation for the year.
Penalties for Missing Tax Estimates
You run the risk of paying a penalty if you don’t pay enough tax whether you use withholding or estimate your taxes and pay them during the year. You can also avoid the penalty and not receive an IRS audit notice if your projected tax payments or withholdings for 2022 equal at least 90% of the anticipated tax owed for that year or 100% of the tax that was reported on your 2021 return.
When are the anticipated taxes for 2022 due?
Estimated taxpayers are subject to a somewhat different filing schedule than the general public. Self-employed individuals, as well as those who hold comparable entrepreneurial or independent contractor positions, are among those who must pay quarterly estimated taxes. This requirement still stands even if taxes from income aren’t deducted from your pay stub before it’s delivered to you. Estimated payments for 2022 must be submitted quarterly together with Form 1040-ES. The following dates are when these expenses are not reimbursed:
- The payments for the first quarter will be made on April 18, 2022.
- The payments for the second quarter will be made on June 15, 2022.
- The payments due for the third quarter will be due on September 15, 2022.
- The payments for the fourth quarter will be made on January 17, 2023.
To determine whether or not the dates for state payments coincide with those for federal payments, check with the appropriate tax office in your state.