Staying in Compliance with the IRS: A Guide to Tax Filings and Paying Estimated Taxes

By Jackson Law Group
July 25th, 2023

Posted in Business & Corporate Law,Tax Law & IRS Defense

As a law firm specializing in solving IRS problems, tax resolutions typically begin with getting taxpayer clients in compliance. In other words, most tax resolutions first require tax compliance. In this post, we’ll guide you through the best practices to help you stay on the right side of the IRS.

1. Estimated Tax Payments

Estimated tax is the method used to pay taxes on income that is not subject to withholding. This may include income from self-employment, business earnings, interest, dividends, rent, or alimony. It also applies to individuals who do not elect voluntary tax withholding. Think of the IRS as a “pay as go” system. It does not matter whether taxes were withheld. It’s generally your obligation to pay the taxes prior to tax filing.

The need to pay estimated tax primarily depends on two criteria:

  • You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and refundable credits.
  • You expect your withholding and refundable credits to be less than the smaller of 90% of the tax to be shown on your current year’s tax return or 100% of the tax shown on your prior year’s tax return.

The IRS expects taxpayers to pay income and other taxes as you earn or receive income during the year, either through withholding or estimated tax payments. The estimated taxes are typically paid in four equal installments throughout the year, generally due on April 15, June 15, September 15, and January 15 (of the following year).

If you do not pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

The IRS provides Form 1040-ES for individuals to calculate and make estimated tax payments. This form contains a worksheet that helps you estimate your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.

2. Tax Filing Deadlines

Being aware of and respecting tax filing deadlines is another crucial step towards maintaining compliance with the IRS. The standard deadline to file individual tax returns is April 15th each year. If you cannot meet this deadline, you can file for an extension, which gives you until October 15th. However, an extension to file is not an extension to pay your taxes — those are still due by April 15th.

3. Seek Professional Help

Tax laws and regulations can be complex. If you’re unsure about anything, it’s always advisable to seek professional help. Certified Public Accountants (CPAs), Enrolled Agents (EAs), and tax attorneys are trained to handle various tax situations and can provide you with expert advice tailored to your situation.

4. Use IRS Resources

Lastly, remember that the IRS offers numerous resources to help taxpayers understand their obligations. Their official website provides forms, publications, and detailed instructions on a multitude of tax topics. In addition, they offer online tools like the “Tax Withholding Estimator” to assist you in figuring out the right amount of tax to withhold.

Compliance with the IRS might seem daunting, but with a little knowledge, organization, and diligence, it is entirely achievable. Be proactive, respect deadlines, keep accurate records, and don’t hesitate to seek professional advice when needed. It’s not just about avoiding penalties; it’s also about gaining peace of mind.

Stay updated with the latest tax laws, understand your responsibilities, and embrace the process. Your diligence will pay off in the long run, ensuring you stay in compliance with the IRS’s tax filing and estimated tax payment requirements.

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