With the April 15, 2020 deadline to file and pay your taxes rapidly looming, people are starting to worry about the balance they owe the IRS for last year. As we have discussed in previous posts, estimated tax payments are an option to pay your taxes throughout the year to make April 15th a little less painful. Today, we discuss three alternatives to making quarterly estimated tax payments.
1. DON’T PAY THE ESTIMATED TAXES
If you don’t want to pay your quarterly estimated tax payments, the path of least resistance is to simply not pay them. However, if you end up owing the IRS over $1,000, without meeting minimal IRS withholding or estimated tax payment thresholds, you may have to pay penalties and interest to both the IRS and state taxing authorities.
The penalty is essentially interest charged on what you should have paid. As of December 6, 2019 that rate is the federal short-term rate plus three percentage points or 5%.
2. INCREASE YOUR WITHHOLDING
If you have taxes withheld every pay period through your employer, you can adjust your W-4 to have more money withheld from each paycheck. If you are eligible, adjusting your W-4 can allow you to avoid having to make a quarterly estimated tax payment.
3. WORK WITH A CPA
The best alternative to calculating and paying estimated quarterly taxes is to contact a CPA who understands taxes and, more importantly, tax strategy.
When you work with a CPA who has a deep understanding of current tax law, he or she can help you implement legal and actionable plans to significantly reduce your tax liability and determine your best payment options.
SCHEDULE YOUR INITIAL CONSULTATION TODAY
Regardless of why you choose to not make your quarterly estimated tax payments, there are options. If you don’t have any taxes withheld at all and you choose to not make a payment, you will incur penalties when the March 15th or April 15th deadline arrives.
At MD Andersen, CPA, PA, we are available and knowledgeable on all things tax-related to look into your situation and advise your next best step. Don’t wait! Contact us today to determine which option is right for you.