Oh taxes. Probably one of the biggest mistreated concepts out there. Today I've decided to shed some light on a question I first started asked myself last April. What are Quarterly Taxes and am I suppose to pay them?
Dealing with taxes caused my stress level to increase to insane heights, since when I first moved to the U.S. - about 4 years ago - I was absolutely blown away by the unsettling degree of complexity when it comes to filing them. Yes, my first 2 years while living in the States, I actually filed my taxes by hand and by myself. Resulting in doing extensive research and creating a love/hate relationship with Uncle Sam.
After that, I realized I could simply buy a program for my computer, which would allow me to finish my taxes in less then an hour.
What Are Estimated Taxes?
Not everyone is officially required to pay estimated taxes. It mostly depends on your level of income. You generally have to pay an estimated tax if you expect to owe the IRS a tax of more then $1000 when you file your return. Estimated Tax payments are made on a quarterly schedule established by the IRS. Let's have a quick look at the Payment timeline.
The IRS has created four due dates for paying these estimated taxes. Unless you are able to pay estimated taxes for the year upfront. Typically they're due on the 15th of each of the established months. Although when the 15th falls on a weekend or federal holiday, the due date will be moved to the following business day.
The Actual Schedule.
- For income received Jan. 1 through March 31, estimated tax is due April 15.
- For income received April 1 through May 31, estimated tax is due June 15.
- For income received June 1 through Aug. 31, estimated tax is due Sept. 15.
- And for income received Sept. 1 through Dec. 31, estimated tax is due Jan. 15.
When you pay after the due date, it will be considered a late payment and you'll probably be penalized.
Misconceptions By Taxpayers.
One of the serious misconceptions by taxpayers is that they can just pay their quarterly taxes entirely by the end of the year. This is wrong and you'll receive a penalty for each missed deadline. The IRS wants its owed taxes paid during the year by each deadline, if you owe them more then a $1000 in taxes. Any missed deadline will result in penalties and interest. Although the IRS seem like a bunch of money suckers, they can actually be pretty forgiving about penalties as they are more interested in collecting taxes then dealing with the paperwork attached to the penalties.