While you only file taxes once a year, every taxpayer is responsible for paying taxes at regular intervals throughout the year. This is what’s known as a “pay-as-you-go” tax structure. As you make money, you are required to pay taxes on it.
How Do I Pay My Estimated Tax?
If you are employed by someone else, you typically don’t have to worry about making these payments: Your employer does it on your behalf by paying the tax they withhold from your paycheck to the IRS.
If you are self employed, however, you are the party responsible for making regular payments to the IRS in order to satisfy your ongoing tax obligation. The IRS typically asks that you make quarterly estimated tax payments in April, June, September, and January. When you file your tax return for that year, you simply record the payments that you already submitted to assess whether you still owe any tax or if you are due a refund from the IRS.
Penalties for Late Payment Throughout the Year
Even if you pay your full tax liability when you file your taxes, you could still face penalties if you missed any internal deadlines for your estimated payments. The IRS will assess penalties based on the number of days that an estimated tax payment remains outstanding. Even if you are owed a refund on your tax return, you could still face penalties if you didn’t make the necessary estimated payments throughout the year.
For guidance regarding estimated tax payments, contact the team at Taxation Solutions, Inc. today! We help Mesa-area taxpayers like you understand your tax liability and estimated tax payments through the year.