Final 2016 estimated tax payment is due Tuesday, Jan. 17

The early part of any new year demands we be tax multitaskers. As we’re getting ready to file last year’s returns, we also must start planning moves that affect this year’s taxes.

For the next few days, though, it’s time for those of us who pay estimated taxes to focus on 2016. We have to make our final 1040-ES payment to close out that tax year.

January-17_photodune-958818-calendar-xs

According to the usual Internal Revenue Service calendar, that final fourth quarter payment is due Jan. 15.

But calendar quirks this year mean a change in that deadline. The 15th is on Sunday and Monday, Jan. 16, is the federal Dr. Martin Luther King holiday.

So the final estimated tax payment for 2016 is due this year on Tuesday, Jan. 17.

Timetable for paying on untaxed income: Estimated tax payments are required when you get income, both earned (for example, self-employment either as your main source of income or from side jobs to your salaried work) and unearned (such as various investment earnings) on which no taxes are withheld.

The estimated tax system was created so that folks without withholding still are a part of our pay-as-you-earn tax system.

Since it would be too much of an administrative hassle for both taxpayers and the IRS, the tax law has set out a specific schedule for estimated tax payments.

Because the estimated payments are required four specific times during the year, they are generally referred to as quarterly payments. But as the table below shows, the tax periods don’t cover the standard calendar quarters.

Payment # Due Date* For income received in
1 April 15 Jan. 1 through March 31
2 June 15 April 1 through May 31
3 Sept. 15 June 1 through Aug. 31
4 Jan. 15 of the next year Sept. 1 through Dec. 31

*If the 15th is on weekend or federal holiday, the estimated payment is due the next business day.

Despite the slight time shifting, if you don’t make the tax payments by the due date for the earnings in the appropriate quarter, you could face a late payment penalty.

And don’t think you can escape by simply paying your full estimated tax bill with this final 1040-ES filing. The IRS will slap you with the fee even if you eventually pay your full tax amount on the income. Remember, it’s pay as you earn.

The IRS prefers that you figuring your estimated tax payments by coming up with a close calculation of your total amount due and then dividing that by four, sending in the quarterly amount for each payment period.

But you also can look at your actual taxable income in each period and pay the estimated amount due on that. It takes more work, both in figuring your quarterly payments during the year and when you finally file your full tax return the following year.

If you have income that fluctuates greatly during the year, this could be the better move. That way you won’t have to come up with tax money for a period when you really haven’t made very much money at all. 

A couple of other options: Planning other things this coming long weekend and don’t really want to mess with estimated taxes? The IRS offers you an out.

You can blow off the Jan. 17 estimated payment if you file your 2016 tax return by Jan. 31 and pay your entire due tax balance with that return. So if you are sure you’ll get your 1040 etc. completed in a couple of weeks, this could work. 

Remember, though, that if you miss the Jan. 17 and Jan. 31 deadlines, you’ll owe more.

Also, for 2017 estimated tax planning purposes, you can make more than four payments if you wish. The IRS would be happy to get your money any time during the year.

To do that, make a copy of one of your unused estimated tax payment vouchers, fill it in, and mail it with your payment. Or you can make the added estimated tax payments electronically, too.

Ways to pay estimated taxes: Now about making those payments, on the proscribed due dates or in addition to them.

You can make electronic payments through Direct Pay or, if you’ve set up an account, the Electronic Federal Tax Payment System (EFTPS).

You also can pay with a credit or debit card by using one of the IRS’ authorized payment vendors. Note, though, that there’s a fee involved (it goes to the vendor, not the IRS) for the processing of these payments.

If you prefer to send in a check, then you’ll need to download the Form 1040-ES package and send in the appropriate payment voucher — the one due on Jan. 15 is the fourth, and final, one of the tax year — to the mailing address show in that document.

2016 4Q 1040-ES voucher

As long as your snail mailed payment is postmarked by Jan. 15, the IRS considers your payment for the estimated tax period as being made on time.

While the IRS is pushing electronic tax payment, the agency is mainly interested in getting the tax money it is due in whatever way you choose.

So figure out what you owe for your final estimated tax payment and pick a payment method. Just make sure you get the money sent on time.

And that next time is next Tuesday, Jan. 17.

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Source: http://feedproxy.google.com/~r/DontMessWithTaxes/~3/CDkmeHhKE84/final-2016-estimated-tax-payment-due-tuesday-jan-17.html

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