Tax Season Resources
Estimated payments for income tax returns (both federal and state) are important for several reasons. Keeping track of the date and amount of each estimated payment will make tax return preparation more accurate and efficient as well as reduce potential IRS or State Department of Revenue notices - which nobody likes!
Estimated payments go toward any tax liability for the year the estimated payment is recorded. This means less tax may be owed when the return is completed, or a refund may exist. In any event, estimated payments reduce or eliminate potential penalties and interest - neither of which is deductible.
In addition, when our clients owe tax, we proactively calculate estimated tax payments for the next year in compliance with IRS safe harbor rules. While these estimated payments may not cover the entire amount of tax due for that year, they will potentially eliminate underpayment penalties when each estimated payment is made timely. Look for your estimated payments with your tax return. When we provide returns electronically in a portal, the estimated payment vouchers will appear as an Action Item. Login to download these and include them with your payments.
Electronic Estimated Payments
A secure and efficient way to pay quarterly estimated payments to the IRS is through their website, www.eftps.com. Any taxpayer can request an online account to make payments, but the setup process can take 6 to 12 weeks to complete. Taxpayers using this site receive a PIN issued by the IRS to the address on their tax return and must set up a password. Both of these items are necessary to access the site and begin making payments. A benefit to using this process is that payments are recorded for the tax year input and the IRS does not inadvertently post to an incorrect year. Additionally, a list of all payments and the dates the payments were made may be printed and used in the preparation of the income tax return.
Making Federal Payments:
Various states have added the ability to pay quarterly estimated payments directly on their websites. Instructions can be found on those states' websites. Please let us know if you have any questions about a specific state.
Making State Payments:
Tax Planning Services
Depending on the type of income earned by taxpayers, it may be possible to increase income taxes withheld to avoid the need for quarterly estimated payments. Additionally, unique circumstances could occur that may cause income to be higher or lower in a future year changing how much tax is owed. We offer tax planning services to our clients for an additional fee to assist them in these areas.
Please call our office with any questions about quarterly estimated tax payments.