Question of the Week
Happy Five-Minute Friday everyone!
I hope you had a good week. This past Tuesday, we had the third quarter estimated tax deadline. Having just paid 1st and 2nd quarter estimateds two months earlier, the deadline may have snuck up on you. And for those of you who haven’t filed your individual tax return yet, you have less than a month (October 15th) to get that in.
So this week, I want to cover three important things to keep in mind if you’re still needing to file.
Where to get help
If you’re looking for a trusted preparer, the IRS has a directory that you can use to search your zip code and preparer credentials such as an attorney, CPA or enrolled agent.
You can also try organizations like the National Association of Tax Professionals, the National Association of Enrolled Agents and the American Institute of Certified Public Accounts.
If all of those fail or are too overwhelming, don’t be afraid to reach out for recommendations from similarly-situated friends. You can also file yourself online by using free or low-cost software.
Don’t forget your estimated tax payments
The estimate tax deadlines for 2020 are July 15th, September 15th, and January 15th 2021.
You have to pay estimated payments if you’re an individual, including sole proprietors, partners and S Corporation shareholders and expect to owe tax of $1,000 or more when you file your return.
When trying to figure out how much you owe, I always recommend you, or your tax professional, estimating tax owed through tax projections. The projections should outline your gross business income, adjusted gross income, taxable income, taxes, deductions and credits for the year. You should also make adjustments for situations where your income may increase or decrease the second half of the year, you have large, lump sum expenses, and/or retirement contributions you may make.
I also like to give my clients percentages that they can use throughout the year based on their gross income. For example, I will have a client take 15% or 20% of every all income and put it in a tax account so the money is there and ready come time to pay the estimateds.
You can send estimated tax payments with Form 1040-ES by mail and by phone. But I recommend, paying online, or from your phone using using IRS2Go app.
If you can’t pay, set up an installment agreement
October 15th is the last day to file your 2019 tax return, if you think you’re going to owe the government money. (If you’re due a refund, you can file anytime within the next two years, but you should file asap to get your money!) So make sure to file even if you can’t pay the balance due. I’ve covered a few options for dealing with the balance in this previous post.
Quote of the Week
“You don’t pay taxes. They take taxes.”― Chris Rock
Task of the Week
Take some time this weekend to assess where you are with filing your return and paying your estimated tax payments. It’s already been a stressful, upside down year. Reduce your stress and anxiety by not waiting until the last minute of the upcoming deadline.