The due date for the third quarter payment to the Internal Revenue Service (IRS) is coming up.
The United States government requires quarterly tax payments because the tax system is a pay as you go program. As a result, the government generally expects taxpayers to meet 90% of their annual tax obligation with payments throughout the year. Those who find themselves owing more than 10% at the end of the year will likely face additional penalties.
Who must pay the IRS a quarterly tax payment?
Quarterly payments do not impact every taxpayer. The IRS generally requires these payments from those who do not already make regular tax payments. This can include business owners, the self-employed, investors and those who choose not to have taxes withheld from their taxable income.
It is also important to note other forms of income can result in additional tax obligations and may make it necessary for the taxpayer to make unexpected quarterly payments. A common example: getting a bonus at work.
A failure to properly account for one’s tax obligations can result in an audit. Audits can lead to additional penalties, fees and, depending on the findings, allegations of criminal wrongdoing.
How are these payments made?
First, the taxpayer must estimate their income for the entire tax years. Then, the taxpayer will need to calculate the taxes they will likely owe based on this estimated income. The taxpayer can then go to the IRS website and pay using a variety of methods such as using the IRS’ Direct Pay system, Electronic Federal Tax Payment System or sending in a check.
When are quarterly payments due?
The IRS reports there are two quarterly payments left for the 2019 tax year: September 17, 2018 and January 15, 2019.