Estimated Tax Payments for quarter two are due. Hi, I’m Bette Hochberger, CPA, CGMA, and on today’s Tax Tip Tuesday, this is your reminder to pay your second 2021 quarterly estimated tax payment if you’re somebody who needs to pay those; many people don’t pay them. If you only have a job where you get a W2, and you’re on the payroll, you probably aren’t making estimated payments, but if you’re a business owner or a freelancer, something like that, you probably have to make these payments. So how do you know how much to pay? That’s always the question. People always want to know; how do I even know?
So there’s a couple of different ways that the IRS lets you be what they call safe harbored, and having a safe harbor means you shouldn’t be getting penalized for not paying enough tax, is what it means. Some states that have income taxes also have rules that are a bit different. So if you live in a taxable state, because you’re not lucky enough to live in Florida, you want to check in on those rules as well and see what the requirements are. But for the IRS, they want you to be 100% paid in based on your prior year’s taxes unless your adjusted gross income is over 150,000, then you have to be 110% paid in. So very easy. Take your tax return from 2020; you see how much a tax liability you had divided by four. There’s your quarterly estimated payment.
Now nothing has been normal last year, this year, right? And we have been living in the apocalypse; nothing is normal. One year might look completely different from the next. You might not be doing the same thing you were doing before. Who knows. In that case, you have to be 90% paid in of your actual liability for 2021. So that could be maybe a little bit tricky to figure out. If you’re one of my Profit First people, you know that we’ve got our tax allocation; we know how much we need to pay in for our estimated tax payments because it’s sitting in our tax allocation bank account. And if you don’t know what I’m talking about, you might want to reach out to me and find out a little bit more about Profit First because it helps to take a lot of the questions out surrounding taxes and what you need to pay things like that.
Then the next question is, how do you go about paying these estimated tax payments? So I love to use the IRS’s website; this is IRS.gov/payments. The best cheapest way to do it is to click right here on this bank account, direct pay, and make a payment. It’s going to ask you for a reason; you say it’s estimated tax, where you’re applying it to et cetera, et cetera. You otherwise could use a debit or credit card, but take a look; there are some fees on there. So it’s going to cost you even more, which that’s not so fun. So make sure you get that payment in today, June 15th, and we’ll see you next time. Thanks.
