Aug 16, 2022 By Triston Martin
On the other hand, self-employed people, those who own businesses, and those who rely on investment income are expected to voluntarily pay their estimated taxes quarterly. Income taxes are collected in the United States on a "pay-as-you-go" basis. When it comes time to file your return, if you haven't been keeping up with your payments, you may find that you owe a significant amount of back taxes on top of any penalties assessed for your late payments.
Generally speaking, payments of estimated taxes are paid in stages on the tax days of April 15, June 15, September 15, and January 15 of the following year. The first "quarter" of the year encompasses the first three months of the calendar year, whereas the so-called second quarter only lasts for two months (April 1 to May 31). The following three months, beginning on June 1 and ending on August 31, make up the third quarter, while the last four months of the year make up the fourth quarter. If a payment's due date occurs on a weekend or a holiday recognized by law, the payment is expected to be made on the next business day.
As a result of Hurricane Ida, the Internal Revenue Service provided residents and company owners in Louisiana and Mississippi, New York, and New Jersey with extensions on the deadlines for completing their returns and making payments. Taxpayers in some areas of Kentucky were also given extensions due to the tornadoes that occurred in December 2021. Residents of Colorado were also devastated by the wildfires that occurred during the same month. You may assess whether or not you are eligible for disaster aid from the IRS by reading their notifications.
After considering any withholding and refundable tax credits such as earned income credits and premium tax credits, taxpayers who anticipate their tax bill will be less than $1,000 do not need to worry about filing estimated taxes. This exemption applies to taxpayers who have a projection that their tax bill will be less than $1,000. Estimated tax payments must be made by self-employed persons, owners of small businesses, and anybody else who gets income that has not had taxes deducted from it to avoid or reduce penalties for late payment. These penalties include interest and other fees.
Suppose you have income from a pension or an annuity. In that case, you may reduce the stress of estimating your tax liability by submitting Form W-4P to the plan administrators or other parties responsible for paying out the benefits to have tax withheld from those payments. By submitting Form W-4V, you also have the option to choose to have a voluntary amount of tax withheld from payments such as Social Security benefits and unemployment benefits. Suppose you have income from an employer, income from working as an independent contractor, or income from investments. In that case, you can increase the amount of money withheld from your paycheck by submitting a new Form W-4 to your employer. Doing so will allow you to avoid paying estimated quarterly taxes.
Important modifications were made to the 2021 tax year due to the American Rescue Plan Act, passed and signed into law on March 11, 2021. This legislation was part of the third coronavirus stimulus package. Some of these modifications will still be in effect for the tax year 2022, while some will expire at the end of that year.
As part of the American Recovery and Reinvestment Act, the maximum yearly Kid Tax Credit was raised from $2,000 to $3,000 for each child between the ages of 6 and 17 and from $3,000 to $3,600 for each child under the age of 6. The increment remained in effect until 2021. It was impossible to enact legislation to continue the higher credit beyond 2022. The credit will revert to a value of $2,000 and will be partly refundable beginning with the tax year 2022.
Every year, the Internal Revenue Service (IRS) revises dozens of tax advantages to account for the effects of inflation. One example of this is the standard mileage rates. Even if you maintain the same income level from 2021 to 2022, these factors may result in a lower tax obligation.
Your taxes may be altered in several ways depending on the circumstances of your life. Will your filing status and the tax rates that apply to it change if you get married or divorced? Are you going to have a kid soon who will qualify you for a tax credit for children? Will you be eligible for a larger share of the mortgage interest deduction and the tax break for real estate if you buy a new home?
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