Estimated taxes are deducted from employees’ paychecks, but self-employed individuals, company owners, and people who live off of investment income must pay estimated taxes on a quarterly basis.
Income taxes in the United States are levied on a per-capita basis. If you get behind on your payments, you may face a high tax bill, as well as penalties for late payment, when it comes time to submit your return.
- Business owners and self-employed individuals must pay estimated income taxes on a quarterly basis.
- Anyone who anticipates to owe $1,000 or more is often obliged to pay quarterly estimates (unless their taxes are automatically deducted by an employer).
- Tax payment dates are typically April 15, June 15, September 15, and January 15 of the following year, with changes to the next working day for holidays.
When Are 2022 Estimated Tax Payments Due?
Estimated tax payments are usually submitted in quarterly installments on the following tax dates: April 15, June 15, September 15, and January 15 of the following year, unless a due date occurs on a weekend or legal holiday. The following are the dates for 2022:
|2022 Due Dates for Estimated Taxes|
|Payment Period||Due Date|
|Jan. 1 to March 31||April 18, 2022|
|April 1 to May 31||June 15, 2022|
|June 1 to Aug. 31||Sept. 15, 2022|
|Sept. 1 to Dec. 31||Jan. 17, 2023|
While the first quarter lasts three calendar months, the second “quarter” lasts just two months (April 1 to May 31).The third quarter covers the next three months (June 1 to August 31), while the fourth quarter covers the remaining four months of the year.
If a payment is due on a weekend or legal holiday, it is payable the next business day. Due to the Emancipation Day holiday in Washington, D.C. on Friday, April 15, the deadline to pay first quarter estimated taxes in 2022 is Monday, April 18. (By law, federal tax deadlines are affected by Washington, D.C. holidays.)
Who Pays Estimated Taxes
Anyone who expects their tax payment to be less than $1,000 after withholding and refundable tax credits such as earned income credits and premium tax credits does not need to file estimated taxes. Self-employed individuals, small company owners, and anybody else who gets income that has not had taxes deducted from it must pay anticipated taxes in order to avoid or reduce late payment penalties.
If you receive pension or annuity income, you may reduce the burden of anticipated taxes by requesting that Form W-4P be filed with the plan administrators or any parties that pay out the benefits. You may also file Form W-4V to request voluntary withholding on payments such as Social Security and unemployment benefits.
If you have both employer and independent contractor or investment income, you may raise your withholding from your paycheck by completing a new Form W-4 with your employer in place of paying estimated quarterly taxes.
What’s New for 2022 Taxes
If you want to use the tax bill from 2021 to predict the obligation for 2022, make the following adjustments:
American Rescue Plan changes
The 2021 tax year witnessed significant changes as part of the third coronavirus stimulus package, the American Rescue Plan Act, which was signed into law on March 11, 2021. Some of these adjustments are still in effect for the fiscal year 2022, while others have not been renewed.
- The American Rescue Plan raised the maximum yearly Child Tax Credit from $2,000 to $3,000 for children aged 6 to 17, and $3,600 for children under the age of six. The increment was in effect until 2021. Legislation to extend the enhanced credit until 2022 failed to pass. The credit will return to $2,000 and will be partly refundable in 2022.
- The investment income ceiling has been increased from $3,650 to $10,000 for 2021. This $10,000 number will be indexed to inflation and updated annually in the future. In 2022, for example, the sum increases to $10,300. As part of the American Rescue Plan Act, this is a permanent alteration.
Several tax advantages, such as the IRS standard mileage rates, are modified for inflation each year. Even if your income stays same from 2021 to 2022, this may result in reduced tax obligation.
Changes in circumstances
Life events may have a variety of effects on your taxes. Will your filing status and tax rates change if you marry or divorce? Are you expecting a kid who will be eligible for the child tax credit? Will a new house allow you to deduct more mortgage interest and real estate taxes?
Am I Required to Pay Estimated Taxes?
If you do not work for an employer that withholds taxes from each paycheck and anticipate owing more than $1,000 in taxes, you must pay estimated taxes. Self-employed individuals and small company owners are among those who pay estimated quarterly taxes.
How Do I Pay My Estimated Taxes?
Fill out Form 1040-ES and submit it to the IRS with a cheque. You may also make estimated payments online with IRS Direct Pay.
What Happens If I Don’t Pay My Estimated Taxes?
If you do not pay anticipated taxes during the year, you will be surprised when you submit your tax return. You will also face fines for failing to pay your quarterly taxes on time.
The Bottom Line
While predicting taxes isn’t an exact science, getting close to the proper amount can help you avoid fines if you keep the quarterly deadlines in mind. When concerns concerning sophisticated tax problems occur, it is a good idea to contact a tax specialist.
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