tax is the method used to pay tax on income that is not
subject to withholding. This includes income from
self-employment, interest, dividends, and rent, as well as
gains from the sale of assets, prizes and awards.
You also may have to pay
estimated tax if the amount of income tax being withheld from
your salary, pension, or other income is not enough.
FILING AND PAYING
Both individuals and business owners may need to file and pay
estimated taxes, which are paid quarterly. In 2018, the first
estimated tax payment is due on April 17, the same day tax
returns are due. If you do not pay enough by the due date of
each payment period you may be charged a penalty even if you
are due a refund when you file your tax return.
If you are filing as a sole proprietor, partner, S corporation
shareholder, and/or a self-employed individual, you generally
have to make estimated tax payments if you expect to owe tax
of $1,000 or more when you file your return.
If you are filing as a corporation you generally have to make
estimated tax payments for your corporation if you expect it
to owe tax of $500 or more when you file its return.
If you had a tax liability for the prior year, you may have to
pay estimated tax for the current year; however, 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.
Note: There are special rules for farmers,
fishermen, certain household employers, and certain
higher taxpayers. Please call if you need more
information about any of these situations.
Who does not have to pay estimated
You do not have to pay estimated tax for the current year if
you meet all three of the following conditions:
- You had no tax liability for the prior year
- You were a U.S. citizen or resident for the whole year
- Your prior tax year covered a 12-month period.
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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. To do this, file a new Form W-4 with your
employer. There is a special line on Form W-4 for you to enter
the additional amount you want your employer to withhold.
You had no tax liability for the prior year if your total tax
was zero or you did not have to file an income tax return.
CALCULATING ESTIMATED TAXES
To figure out your estimated tax, you must calculate your
expected adjusted gross income, taxable income, taxes,
deductions, and credits for the year. If you estimated your
earnings too high, simply complete another Form 1040-ES,
Estimated Tax for Individuals, worksheet to re-figure your
estimated tax for the next quarter. If you estimated your
earnings too low, again complete another Form 1040-ES
worksheet to recalculate your estimated tax for the next
Try to estimate your income as accurately as you can to avoid
penalties due to underpayment. Generally, most taxpayers will
avoid this penalty if they owe less than $1,000 in tax after
subtracting their withholdings and credits, or if they paid at
least 90 percent of the tax for the current year, or 100
percent of the tax shown on the return for the prior year,
whichever is smaller.
Tip: When figuring your estimated tax for the
current year, it may be helpful to use your income,
deductions, and credits for the prior year as a starting
point. Use your prior year's federal tax return as a
guide and use the worksheet in Form 1040-ES to figure
your estimated tax. However, you must make adjustments
both for changes in your own situation and for recent
changes in the tax law.
For estimated tax purposes, the
year is divided into four payment periods and each period has
a specific payment due date. For the 2018 tax year, these
dates are April 17, June 15, September 17, and January 15,
2019. You do not have to pay estimated taxes in January if you
file your 2018 tax return by January 31, 2019, and pay the
entire balance due with your return.
Note: If you do not
pay enough tax by the due date of each of the payment
periods, you may be charged a penalty even if you are due
a refund when you file your income tax return.
The easiest way for individuals as well as businesses to pay
their estimated federal taxes is to use the Electronic Federal
Tax Payment System (EFTPS). Make ALL of your federal tax
payments including federal tax deposits (FTDs), installment
agreement and estimated tax payments using EFTPS. If it is
easier to pay your estimated taxes weekly, bi-weekly, monthly,
etc. you can, as long as you have paid enough in by the end of
the quarter. Using EFTPS, you can access a history of your
payments, so you know how much and when you made your
estimated tax payments.
Please call if you are not sure whether you need to make an
estimated tax payment or need assistance setting up EFTPS. Don't hesitate to call the office today at 301-657-8080.
DID YOU KNOW
that Sullivan & Company manages Pension Funds,
Retirement Plans & Taxable Accounts through Archer
Investment Corporation & Fidelity Investments for our
Fidelity is the custodian for more
retirement plans than any other custodian in the United
Let Sullivan & Company Analyze Your Asset Allocation
& Risk Tolerance for FREE!
Management at Sullivan & Co. CPAs
Sullivan leads our
Group and is here to help you navigate your
As Investment Advisor
Representatives, he and our Wealth Management team are able
to provide an independent opinion on the investments you
already own or are considering buying.
We can structure a portfolio
based on your risk tolerance or we can help you decide how
to invest in your company 401(k) plan.
We work with each
client to identify their concerns and to provide solutions
according to their situation.
is also experienced in company retirement plans. If you own
a business that does not have a plan; we can discuss your
options and set up a plan that fits your company.
If your business already has a
plan; we offer a free evaluation of the plan to ensure that
it is up to date and working well for you and your
Our goal is to provide personal, unbiased and independent
advice to help you make well-informed decisions about your
financial life and investments.
Contact Chris Bailey, CPA, MBA, IAR
or Paul Sullivan, CPA, IAR to set up a free
initial consultation (301) 657-8080.
And as always if you have any questions about accounting or
investments and how they effect you or your business, please
give us a call. We can help guide you in the right
you can call our offices if you have any questions about these
or any other accounting, tax, financial planning or insurance
related issues, at 301-657-8080.
Regards, Paul Sullivan, CPA, IAR
President, Sullivan & Company