While going through your previous tax returns you might be thinking whether you really need to make quarterly tax payments to Uncle Sam. The ideal situation for US taxpayers is to have a zero tax liability at the end of the year. This way you do not need to take the pain of setting aside money every quarter. However this situation may not be common for everyone. Estimated tax payments depends upon a number of factors given below:
- You have investments
- You are self-employed, and you pay US Social Security taxes
- You are an employee who spends time working in the US
- Your foreign self-employment income and/or foreign wages exceed the Foreign Earned Income Exclusion (FEIE, which is $ $100,800 for 2015).
How to Calculate estimated taxes
If at the time of filing your tax return, you expect to owe at least $1,000 then you are required to make estimated tax payments. If you expect no change in your tax liability this year, the amount you should pay is the amount you owed on last year’s tax return. Divide that by 4 to calculate this year’s quarterly estimated payments. If you expect any changes this year, you should change your current year estimates accordingly.
When to make the estimated tax payments
Estimated tax payments can be made every month but no later than a quarter. The quarterly tax payments are sent out to IRS on the following dates:
- April 15
- June 15
- September 15
- January 15
How to make Estimated tax Payments
You can pay your quarterly estimated tax payments electronically through the Electronic Federal Tax Payment System (EFTPS).
You can also mail your quarterly estimated tax payment to the IRS by filling form 1040-ES and attaching the check along with the same.
What if you don’t pay?
If you don’t make the estimated tax payments you might end up paying the underpayment penalty. The penalty will depend on how much you owe and how long you have owed it to the IRS.
Analyzing whether you need to make estimate tax payments and determining how to do it, can be overwhelming. Thus we at US Tax Practice provide you easy assistance in making your tax planning process simple and hassle free. Contact us today!
About US Tax Practice GmbH: US Tax Practice offers U.S. tax services in Switzerland. It is the go-to tax preparation service and compliance practice for U.S. tax payers. Located in Lenzburg, Switzerland, the company was founded by Patrick Evans, a U.S. tax accountant (CPA, CGMA) and U.S. citizen determined to work with his clients’ best interests in mind. US Tax Practice GmbH services include U.S. Income Tax Preparation, U.S. Tax Compliance, Foreign Bank Account Reporting (FBAR), Tax Planning and Optimization, and Expatriation.