I.3, IRS Reminds Taxpayers of Second Quarter Estimated Tax Payments’ Deadline (IR-2021-125)
Jun. 9, 2021
The IRS has reminded taxpayers who pay estimated taxes that the deadline to make payments for the second quarter of tax year 2021, is June 15. Moreover, third quarter payments are due September 15 and the final tax payment for the year at issue is due on January 17, 2022. Importantly, 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, rent, gains from the sale of assets, prizes and awards. Individuals, including sole proprietors, partners and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when they file their return. Individuals can review the worksheet in Form 1040-ES, Estimated Tax for Individuals, for information regarding who must pay estimated tax. Corporations generally use Form 1120-W, Estimated Tax for Corporations, for appropriate information.
Further, estimated taxes are on a pay-as-you-go basis; therefore, income is paid as it is received. Taxpayers can either withhold from pay, pension or social security payments, or alternatively make quarterly estimated tax payments during the year. The Service has urged taxpayers to make payments in four equal amounts in order to avoid penalties. However, if income is received unevenly, there is leeway to vary amounts of payments. Further, taxpayers are recommended to use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to check if they owe a penalty for underpaying their estimated tax.
Finally, individual taxpayers can make payments using the IRS Direct Pay tool, or pay via debit or with credit card. Individual taxpayers were also recommended to use the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. Corporations are to use electronic funds transfer to make all federal tax, including installment payments of estimated tax; done via the EFTPS. If a corporation wishes to use a substitute to EFTPS, it may arrange for its tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on its behalf.
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