Sullivan & Company - Certified Public Accountants 4709 Montgomery Lane #201 - Bethesda, MD, 20814 Phone: 301-657-8080

       

 



 



 

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This Month's Feature Articles

 

- Five Tax Provisions Retroactively Extended for 2017
 

- Understanding Estimated Tax Payments
 

- Need to File an Extension? Don't Wait.
 

- IRS Dirty Dozen Tax Scams for 2018
 

- Refundable vs. Non-Refundable Tax Credits

 

Tax Tips

 

- Late Filing and Late Payment Penalties
 

- Canceled Debt may be Taxable
 

- Five Tax Tips for Older Americans
 

- Time for a Paycheck Checkup
 

- Correct Filing Status and Reporting Name Changes



 

 

 

 

 

 

Understanding Estimated
Tax Payments


 

Estimated 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 ESTIMATED TAXES

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 tax:

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 quarter.

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.


QUESTIONS?

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 clients.
Fidelity is the custodian for more retirement plans than any other custodian in the United States.


Let Sullivan & Company Analyze Your Asset Allocation & Risk Tolerance for FREE!
Call 301-657-8080 today!

 


 

 Wealth Management at Sullivan & Co. CPAs

Paul Sullivan leads our Wealth Management Group and is here to help you navigate your financial future.

 

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.

Paul 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 employees.

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 Ben Perron, CPA, 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 direction.

 


 

Remember 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

 

 

 

 

Sullivan & Company, CPAs | 4709 Montgomery Lane | Bethesda, MD 20814 www.eSullivan.net | email: pSullivan@eSullivan.net
Direct: 240-316-3531 | Main no.: 301-657-8080 Ext 102 | Fax: 301-657-9055