![]() ![]() The penalty for underpayments in the first and second quarters of 2021 is 3% for most taxpayers and 5% for large corporate underpayments, according to the IRS.Īnd, some individuals and businesses will get extra time to make the first quarter estimated payment. "The penalty for missing the first quarter estimate as an example is generally an intangible amount of money that most taxpayers will not feel." "If it doesn't get done, it's not the end of the world," said Markowitz. In addition, if you miss the first payment or underpay, the penalties are generally small amounts, according to Adam Markowitz, an enrolled agent with Howard L Markowitz PA CPA in Leesburg, Florida. To be sure, keeping the April 15 estimated tax deadline can help those who need to make the quarterly payments manage their cash flow throughout the year, said Sheneya Wilson, CPA and founder of Fola Financial in New York.Įven if you do make estimated payments, you can calculate what you owe for April 15 and take advantage of the extension to file your tax return later, said Wilson. There are penalties if you miss a payment "Conflating all of those things on top of each other, there is really no relief for those individuals," said Barry Melancon, a certified public accountant, chartered global management accountant, and president and CEO of the American Institute of CPAs. ![]() Some may have loans through the Paycheck Protection Program, an Economic Injury Disaster Loan or a grant. ![]() On top of that, small businesses and self-employed individuals paying estimated taxes have been hit particularly hard by the Covid pandemic and may be dealing with multiple issues that would complicate tax filing. "So it's still going to create a little bit of work for the taxpayer." "You still have to complete the 2020 return to get a bottom-line number to pretty much do an estimate," said Rhonda Collins, director of tax content and government relations at the National Association of Tax Professionals. ![]() To avoid penalties for underpaying estimated taxes, people who owe more than $1,000 in tax after subtracting withholding and credits must pay the IRS at least 90% of the tax for the current year or 100% of the tax for the prior year, whichever is smaller. However, the agency didn't push back the three remaining payments - the second quarterly payment was also due on July 15, 2020. The due date marks a change from 2020, when the IRS did push back the deadline for the first of four estimated tax payments to July 15 due to the coronavirus pandemic. This mostly affects freelance and gig workers, as well as those with small businesses such as sole proprietors, partners and S-corporation shareholders - generally, anyone who doesn't work for an employer that withholds taxes from their paycheck. More from Invest in You: How much to expect to get from Social Security if you make $40,000 'Catch Me If You Can' con artist says this scam is making a comeback Prevent tax return anxiety by following these steps That includes people who have income that is not subject to withholding, such as earnings from self-employment, interest, dividends, rent and alimony, according to the IRS. ![]()
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