 Internal Revenue Service IRS tax news. What taxpayers need to know about making 2022 estimated tax payments. Number one, if you don't pay your taxes, the IRS will hit you over the head relentlessly, metaphorically speaking, with its two sticks, known as penalties and interest. Number two, getting hit over the head by sticks, even metaphorical ones, hurts. Number three, therefore, make sure to pay your dang taxes. IRS tax tip 2022-90 June 13, 2022. By law, everyone must pay tax as they earn income. In other words, as you make the money the IRS wants their share of it, they don't want to wait till the end of the year. They certainly don't want to wait till next year by April 15 when you actually file the tax return. They want their money now as you earn it. You might say, well, wait a second, isn't that difficult given the fact that I don't know how much tax I'm going to owe or what rate I should be applying to the current earnings given the fact that we have a progressive tax system? So every dollar I earn has a potential to be at a higher tax bracket, which kind of confuses the estimate of how much money I'm going to owe. And I've had a lot of fluctuation with my job, so I might have some gig work now. I might be working at a W-2 place as an employee. And there's also been a lot of changes to the tax code in part having these kind of prepayments that are going out with the child tax credit. So if there's not consistency in the tax code, how in the world am I supposed to estimate how much tax I'm going to owe so that I could pay you during the year? And the IRS says tough, you know, that's what we want you to do. So that means that we're going to have to make the best estimate that we can pay during the year to avoid getting hit by the sticks of penalties and interest. So that's that's our goal here. So generally, taxpayers must pay at least 90% of their taxes throughout the year through withholding, estimated or additional tax payments or a combination of the two. And you might say, well, what if I don't pay as I go? What if I don't? Well, then they hit you with the sticks, penalties and interest. You know how it works. If they don't, they owe an estimated tax penalty when they file. There it is. There's the stick. Some taxpayers earn income not subject to withholdings. So you might say, hey, look, I'm doing some more gig work these days and whatnot. If you go into a Schedule C type of business, then a lot of people are not aware of the fact that they got to track their own taxes when they start the Schedule C type of business and they start to get behind on that. Because when they are an employee, they've been forced to file the W-4 and the calculation on the W-4 is typically designed so that you pay a little bit too much in taxes so that you get a refund. They also are forced to take out Social Security and Medicare. If you are a sole proprietorship, you go into gig work, you do some stuff on your own, then you actually have to set up your own payments to the IRS, which is even more painful in some ways. Because you actually have to kind of write a check or give some kind of electronic transfer to the IRS instead of just kind of blaming the employer for doing it. The employer took money out of my paycheck or something like that. You also have the self-employment taxes to deal with, and that's going to be basically both sides of the self-employment tax, the employer and employee side in the form of self-employment, Social Security and Medicare. So you want to be on top of that because if you're not, even if your business is doing good, I've seen people really get behind on their taxes. And it's really, you know, a hard thing for a startup business, which is going through the startup process in the first place. They don't need to be dealing with the tax problems that they got behind on. And so for small business owners and self-employed people, that usually means making quarterly estimated tax payments. There's a link to that here. Here are some key things to help taxpayers determine if they need to make estimated tax payments. Generally, taxpayers need to make estimated tax payments if they expect to owe $1,000 or more when they file their 2022 tax return after adjusting for any withholding. So if you owe a significant amount of taxes, then the IRS wants their money as you earn it. As you earn it, that's when we want it. That's what they're saying. So the IRS urges everyone in this situation to check their withholding using the tax withholding estimator on irs.gov, irs.gov. And this is getting a better and better tool. Remember that it's a lot more difficult these days for many people, most people, if not all people, to figure out what their estimated taxes should be. Whether you have a W-4 situation, whether you're working as an employee or whether you have your own business and you're trying to figure out your estimated tax payments. Because there's been changes to a lot of people's employment status. A lot of people might be bouncing around on different jobs. You might have different family members working at the same time during the last couple of years. You might have picked up some gig work and so on as the office work has gone down and have to deal with a Schedule C kind of business. And the tax law has changed. Usually the tax law is somewhat consistent over a long period of time. It's had a lot of changes over the last few years, which makes it a lot more difficult to try to figure out what your estimated taxes will be. And so the tax withholding estimator is basically an estimating tool, tax software in essence, so it's a useful, it is a good tool to be using. So if the estimator suggests they changed, the taxpayer can submit a new form W-4 to their employer. So if you have an employer and your tax withholding situation changed, don't think that the employer is going to give you advice. They probably won't because the HR department doesn't want to get sued. They just want to make sure that they give you the, they're just going to say, here's the W-4, here's the process. They're not going to tell you how to fill it out or something like that generally. You want to use the tax withholding estimator to do that and then give that to the HR department who will then do what you tell them to do so they don't get sued. So aside from business owners and self-employed individuals, people who need to make estimated tax payments also include sole proprietors, partners, and S-Corporation shareholders. It also often includes people involved in the sharing economy. The sharing economy is so nice. Corporations generally must make these payments if they expect to owe $500 or more on their 2022 tax return. Aside from income tax, taxpayers can pay other taxes through estimated tax payments. These include self-employment tax and alternative minimum tax. Alternative minimum tax often hits higher income individuals. So if you have to deal with that, you got to deal with that. You're probably aware of it. The self-employment tax, again, if you're new to a sole proprietor, if you're new to going from a W-2 business to a your own business, doing some gig work or something like that. Don't forget the self-employment tax because it can be significant, harmful, hurtful if you forget it. And then you're like, what in the world? That's a significant amount of cash that they're dealing what happened. The remaining deadlines for paying 2022 quarterly estimated taxes are June 15, September 15, and January 17, 2023. Taxpayers can check out these forms for details on how to figure their payments. You got form 1040ES, that's like the 1040 voucher form, estimated tax for individuals, form 1120W, estimated tax for corporation. Taxpayers can visit IRS.gov to find options for paying estimated taxes. These include direct pay from your bank account, paying by credit or debit card or the electronic federal tax payment system, mailing a check or money order to the IRS, paying cash at a retail partner. That last one always cracks me up. It just seems like it's designed specifically for drug dealers. You're like, I know it's illegal to be a drug dealer and you can't do that or whatever criminal thing you're doing. But we still, we'd still like you to at least pay your taxes even if so you could pay, you could pay by cash. We'll set up a cash kind of system. Anyways, anyone who pays too little tax throughout withholding, through withholding, estimated tax payment or a combination of the two may owe a penalty. In some cases, the penalty may apply if their estimated tax payments are late. The penalty may apply even if the taxpayer is due a refund. For more information on this very informative and interesting topic, you can look at form about form 1040. There's a link to that form 1120 instructions, publication 505, tax withholding and estimated taxes. There's links to that stuff. There's links to the withholding estimator tool and all the forms that we talked about. It's all here. It's all here. And there'll be a link to this in the description.