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General Rule<\/strong><\/p>\n\n\n\n Independent contractors, typically referred to as self-employed individuals or gig workers, are generally required to file quarterly estimated income taxes using IRS Form 1040-ES. These payments are due April 15, June 15, and September 15 of the current year, and the last quarterly payment is due January 15 of the succeeding year. <\/p>\n\n\n\n If a taxpayer wishes to make more frequent estimated tax payments, or make payments on other dates, there is no prohibition of doing so. For example, we often advise realtors who get paid a commission when a house is sold to make an estimated payment when the commission is earned. By doing so, they are assured that they have the funds to make those estimated payments. Far too many realtors wait until the next quarterly due date, only to find that they expended all of the commission money earned and have nothing left to pay the IRS. If several sales are closed in the same month and multiple payments are made to the IRS in that month, the IRS is most willing to accept those payments. <\/p>\n\n\n\n Exceptions to General Rule<\/strong><\/p>\n\n\n\n Self-employed people and gig workers who also receive salaries and wages from an employer can generally avoid having to pay estimated tax by asking their employer to withhold more tax from their paycheck. This usually requires the filing of a new Form W-4<\/a>, Employee\u2019s Withholding Certificate, with the employer. A special line on Form W-4 allows a taxpayer to enter an additional amount to be withheld.<\/p>\n\n\n\n Taxpayers receiving a paycheck can check the Tax Withholding Estimator <\/a>on IRS.gov to determine if the right amount of tax is being withheld from their paycheck.<\/p>\n\n\n\n Also, individuals don\u2019t have to pay estimated tax for the current year if they meet all three of the following conditions:<\/p>\n\n\n\n Tax Tip #1<\/p>\n\n\n\n Just because you are not required to make an estimated tax payment, or are only required to make a minimum payment to avoid the underpayment penalty, that does not necessarily mean that is the best strategy. Comes April 15 of the succeeding year, you will be required to pay the full balance due or be subject to failure to pay penalties. If you are self-disciplined, an alternative strategy could be to pay the minimum, but set aside the funds that will be needed to pay the full liability come April 15. <\/p>\n\n\n\n <\/p>\n\n\n\n If you would like to discuss your business or personal tax planning<\/a>, tax preparation<\/a> and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601<\/a> today to make an appointment at our Exton PA CPA office<\/a> to discuss your situation. You can also schedule a consultation at Click Here<\/a>. <\/p>\n\n\n\n Copyright \u00a9 2022 Keystone Financial Solutions, Inc. All rights reserved. <\/strong><\/p>\n\n\n\n BE SURE TO READ THE DISCLAIMER PAGE: Tax laws, IRS rules and regulations change frequently<\/strong>. Although we hope you’ll find this information helpful, this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher shall not assume liability for any losses, injuries, or damages from the display or use of this information.<\/strong><\/p>\n\n\n\n About F. Bryan Haarlander, EA, CTRS:<\/strong><\/p>\n\n\n\n Bryan\nHaarlander is an IRS licensed Enrolled Agent and who owns and operates a\nspecialized tax services firm serving clients in the western suburbs of\nPhiladelphia, PA, which includes the cities of Chester Springs, Coatesville,\nCollegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia,\nPhoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks,\nChester, Delaware, Montgomery and\nPhiladelphia Counties, as well as clients in Delaware, New Jersey, New York and\nthroughout the continental USA. <\/p>\n\n\n\n
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