 In total revenue surface IRS tax news! IRS September 15th is the deadline for third quarter estimated tax payments. The deadline! We, the IRS, have taken the line hostage. And if you don't pay your taxes, that line we took hostage is a deadline. And just to show you we're serious, we're giving you a small piece we severed from the deadline right here, right now. Period. Being President in the United States is usually like running the gauntlet. That's impossible! That's nothing! But President Biden somehow slept through the gauntlet. Was that a great number? I don't know, I slept through it. Me too, that's why I asked. I didn't think it was possible, but here we are. I mean, it's almost like somebody turned the gauntlet completely off and instead installed a walking sidewalk, put a semi-sentient man on it, and then praised him for conquering the gauntlet. Bill, that's not how it's supposed to work. It's like, hey, wait a second. Hey, hey, hey, wait, wait, wait a minute. Please do not interrupt the ceremony, Bob. A walking sidewalk is not the gauntlet. It's not the same thing. It's not like some kind of walking sidewalk gauntlet. Oh, that's not quite the same. No, that's not. I mean, yeah, he may actually still die on the walking sidewalk gauntlet, but not because of the gauntlet itself, but rather due to over-exhaustion from Pat himself on the back. The revolution has been a huge success. Yay, us. Pat on the back. Pat on the back. Come on. No? Attempting to take credit for any random good thing that happens in the world. I mean, he's like, yes, it's true. My presidential authority is what caused one solitary bee in Idaho to fart pollen on precisely the correct flower, which, like the massive impact of a butterfly's wings can have, caused a multiplier effect that saved the entire farming industry. Don't you think you should thank me? I mean, honestly, death by patting yourself on the back, that's no way to go. There's no way for a man to die. Yeah, you're right, Ed. A parachute not opening, that's a way to die. Getting caught in the gears of a combine. Having your nuts spit off by a lap-lander, that's the way I want to go. I'm sure President Biden will pull through, though. Never has a doubt crossed my mind. Just think positive. Never let a doubt enter your mind. He's right, Wilma. I wouldn't wait until the last minute to fill out those organ donor cards. And as long as he's still feeling well, he is welcome in American politics. He's better. He's welcome back at police squad. Unless he's a drooling vegetable. But I think that's the only common sense. Honestly, doctors can save just about anything these days. I think we can save your husband's arm. Where would you like it sent? IR 2022-157, September 6, 2022, Washington. The Internal Revenue Service reminds taxpayers who pay estimated taxes that the deadline to submit their third quarter payment is September 15, 2022. What? I got to do that. What's today? It's September 6 right now. So you got to tell September 15 in order to make your third quarter estimated tax payments. Now, if you're a W-2 employee, then you're already making your payments generally because your employer is typically taking those payments out of your paycheck, which is determined in part by your W-4 that you fill out that will inform the employer how much to take out of your paycheck. So if that's the situation, you're probably good, but you want to make sure that they're taking out the proper amount out of your paycheck so that you can avoid penalties and interest, which would result from taking out too little out of the paycheck. If you're a sole proprietor, then that's one of the most common areas where you might have to actually write a check to the government and typically they want to get paid in the year that you earn the money. So we're currently in 2022. Although we're going to be paying or filling out the tax form in 2023 by say April 15, we want the IRS wants their money in 2022 and we want to avoid penalties and interest. So we're going to try to pay them in 2022 if you're actually making payments because you're something like a sole proprietorship, then they typically want to be paid on a quarterly basis. This can be difficult because clearly you don't know how much to pay them until you've actually filled out the tax return generally, or at least not perfectly because the tax code is quite complex because we have a progressive tax system, for example. So you want to have to make sure that you're making estimates once again in order to avoid the penalties and interest. Now there's been a lot of people that are fluctuating between their job situations in the last few years, possibly being employees, going to sole proprietorships. You might be partially employed and having a part-time job at this point and then also doing gig work or something like that, which is becoming more and more common. If you have some W-2 earnings, you might be able to adjust your W-2 earnings to not only cover the taxes you earn there, but also taxes that you're going to owe based on the income you make on your gig work or your side job or your Schedule C business. If you don't have any withholding capacity, then you're probably going to have to make the estimated tax payments. You want to make sure that you have that in mind, understand that you not only have the federal income taxes, but also the self-employment, which is like the social security, but you typically have to pay twice as much because you're the employee and the employer, although you have the benefit of deductions and what not to. And people that don't get that on that in time, it's often like kind of a really painful process for a small business to go through, even if you're making money. If you don't take into consideration the taxes and you get behind on the taxes, it could be a devastating thing to a business, even if the business is otherwise successful. So in any case, taxpayers not subject to withholding, such as those who are self-employed, investors or retirees, may need to make quarterly estimated tax payments. So that's what we're talking about here. Taxpayers with other income not subject to withholding, including interest, dividends, capital gains, alimony, cryptocurrency and rental income also normally make estimated tax payments. So like when you think about the income tax, we're taxed on income. Then the question is what is income? And the IRS basic perspective is that income is anything, except what they say it isn't. So anything that they don't describe as not being income in the IRS's view in general is income. And so if you have income that they can highly regulate like income that's going through a W-2 employer situation, then they're actually able to go to the pay herb. And it's always useful to see how this works. You have an income tax and so where does the IRS have leverage in order to enforce an income tax? They have leverage on the pay herb, the one paying in, and because that's the person that wants a deduction typically. So an employer wants a deduction of wages. The IRS says, well, if you want that deduction, you not only have to tell us how much you pay the employee, but you have to take some of their money and give it to us. That's a pretty high level of control. The IRS has over that. And then you also have to report it to us with a W-3 and a W-4 and so on and so forth. In other situations, you might have income where the IRS has less regulatory capacity to force the pay herb to pay them, but they still want information returns. Like for example, dividends and so on. In that case, then the financial institution is wanting to keep business and the IRS is going to say, well, you have to report to us the income that you gave if you want to stay in business. So you've got to tell us how much you gave them with a 1099 dividend or interest, but we're not going to force you at this point in time to give us withholdings on it, but you have to tell us so that we can see if they report it. Cryptocurrency is an area where the IRS has a little bit more issues these days and that's why they're jumping on it a lot to try to get a stranglehold on how they're going to get reported and get their money there. And then other kinds of businesses are a little bit more difficult to the IRS because if you're in a business like a hair salon or something like that, then you're not getting paid from other people. So you're not going to get a 1099... I mean, you're not getting paid from other businesses. You're getting paid from people and the people aren't required to give you a 1099 because they don't get a tax deduction from getting their hair cut. So the IRS is going to be skeptical on those types of businesses because there's no reporting that they get on them. So in any case, that means that if you get income and you're not getting withholdings on it, whether you have any reporting on it or not, you're supposed to then make payments on it and make your estimated tax payments. So in most cases, taxpayers should make estimated tax payments if they expect to owe at least $1,000 in taxes for 2022 after subtracting their withholdings and tax credits. They're withholding and tax credits to be less than the smaller of 90% of the tax to be shown on their 2022 tax return or 100% of the tax shown on their 2021 tax return. And this is kind of a safe harbor kind of situation because if you're new, if you have a new business or business that's just started or it's only been in business for a year or two or a few years or even if it's been in business for a while, you might not be able to predict what the income is going to be in 2022 based on 2021. So you could try to say, if you can, the IRS is trying to say, hey, if you pay 100% of the taxes shown on 2021, in general, then you may still be able to avoid penalties and interest in most cases, even though your income is higher possibly in 2022 because you try to use 2021 as an estimate, right? So there are 2021 tax returns must cover all 12 months. So you can't say, well, 2021 was only, I was only had a business for four months and then I tried to base my 2022 income on 2021, which doesn't make sense because you had a full year of income in 2022 and in 2021, you only had like a few months of income. So there's that to consider. So special rules apply to some groups of taxpayers such as farmers, fishermen, casualty and disaster victims. Those who recently became disabled, recent retirees and those who received income unevenly during the year. That's a big one that comes up. Oftentimes you might say, hey, look, how can I pay my taxes in January when all my income happens in December, right? I mean, you want my payments to be made evenly over the year, but I didn't make any money in January. I made it all in December. So it doesn't seem fair that you want me to pay, you know, evenly over the year. So if you have that kind of issue, you could dive down into Publication 505 with holding or tax withholding in estimated taxes to dig into that a bit more. It provides more information on estimated tax rules. The worksheet in Form 1040ES, Estimated Tax for Individuals or Form 1120W, Estimated Tax for Corporations has details on who must pay estimated tax. So how to figure estimated tax? To figure estimated tax, individuals must figure the expected adjusted gross income. That's their AGI, taxable income, taxes, deductions, and credits for the year. Now remember, you might think if we had a flat tax, it would be a little bit easier, right? We'd be able to say, hey, look, I made this much in the first quarter. I'm just going to multiply it times my tax rate, and that's how much tax I'm going to owe. But you can't do that because we have a progressive tax system. So if you made 20,000 in the first quarter, but you expect to make 100,000 in the year, then your tax bracket for the 100,000 is going to be much higher than a tax bracket for 20,000 for the full year. So you got to think about, okay, so in other words, you can't just take the 20,000 and multiply it times the 20,000 tax bracket rate because the rate will be too low. You got to estimate that you're going to make 100,000 and then use that tax rate, the appropriate tax rate to take the portion that you owe in January. So you kind of have to annualize the income that you're going to make, and then the IRS would like it to be spread out evenly over the four quarters and then make even four quarter payments unless you under a special rule where your income is uneven over the year and then you could look into that in more detail. So to figure as we saw that, so when figuring in 2022 estimated tax, it may be helpful to use income deductions and credits for 2021 as a starting point. So you could start in 2021, and this is why we need the tax code generally to be somewhat simple and somewhat predictable, which it hasn't been for the last couple of years, right? Because clearly, if things were going somewhat predictable, we can look at the past and we can better predict what's going to happen in the future. If the tax code is changing wildly all the time and our income situations are changing wildly all the time, it becomes a lot more difficult to look at the past and then try to think about what's going to happen in the future. At this point in time, people have problems with estimates for multiple reasons. One is the tax code's way complex, but we've always had that kind of problem. But two, the tax code is changing quite a lot in a very short period of time. And three, people's income is fluctuating a whole lot. So those are challenges that we've got to overcome in such a way that we can avoid, hopefully, penalties and interest. So when figuring in 2022 estimated tax, it may be helpful to use income deductions. Use the 2021 federal tax return as a guide. So taxpayers can use form 1040ES to figure their estimated tax. You can look up that form on the IRS website. You've got the withholding estimator. Now, this is a really useful tool because, again, it's difficult to figure the proper withholdings based on the prior years oftentimes these days. So you really need software to kind of figure out what, at this point in time, the law looks like it's going to be for 2022 and then try to enter your income that you think is estimated to figure out your estimated taxes. So if you don't have software to do that, you could use the tax withholding estimator, which is an online tool, which is getting more and more to be basically tax projection software. It's getting more and more detailed. You can put information in it to give you, hopefully, a good estimate of what your estimated taxes could be. So it actually is a really good tool, getting better tool. It's on irs.gov. There's a link to that here. It offers taxpayers, and you might want to do it quarterly, every quarter, if you have a business and rethink about, well, how much am I going to make in the year and then try to figure out what your estimated tax payments should be so you can avoid penalties and interest. Okay, so offers taxpayers a clear step-by-step method to have their employers withhold the right amount of tax for their paycheck. So you can use it for W-2 employees, but I think you can also use it for estimated taxes, too. It also has instructions to file a new form W-4. That's the form you need when you're trying to change your estimated taxes to an employer to give to their employer to adjust the amount withhold each payday. So if you're an employee and you're adjusting your withholdings, which, again, many people probably want to look at because of changes in what's happening in their work and with the tax codes over the last few years, double-check your withholdings to make sure you don't get hit with penalties and interest. Don't think that you can go to your employer to the Human Resources Department and ask them for advice because they're probably going to snub they're not going to do it generally not because they're not nice but because they don't want to get sued and they probably get asked that all the time and they're really going to say, I can't give you tax advice but just give us the tax form the W-4 form. So in general, you got to go get your W-4 estimator tool and figure out what you want on the W-4 form fill it out and just give it to the Human Resources Department so that they don't have to worry about getting sued by giving you any advice. So how to avoid an underpayment penalty Taxpayers who underpaid their taxes may have to pay a penalty so that's the point. Like, what's the point here? You try not to get hit by the sticks of penalties and interest. This applies whether they pay through withholding or through estimated tax payments. A penalty may also apply to estimated tax payments even if someone is due a refund when they file their tax return because you didn't pay it quarterly, like we said so. So to see if they owe a penalty Taxpayers should use form 2210 underpayment of estimated tax by individual, estate and trust. There's a link to that here. Taxpayers can also see form 2210 instructions under the waiver of penalty section. So you can try to waive a penalty if you're under like good, good, if you've been a good taxpayer in the past that's often helpful to at least waive a first time penalty. The IRS may waive the penalty if someone underpaid because of unusual circumstances and not willful neglect. So you can also try to plead the circumstances which I assume these days would be something like I happen to be part of the underserved minority group of the purple people, one armed four foot something that have, or I don't know how to go. That's how they do it on TikTok. I think the IRS is adopting the TikTok rules on how to plead for some kind of assistance. But in any case examples include casualty, disaster or another unusual circumstance. An individual retired after reaching age 62 during a tax year when estimated tax payments applied. An individual became disabled during a tax year when estimated tax payments applied. Specific written advice for an IRS agent given in response to a specific written request. The taxpayer must provide copies of both. The fourth and final 2022 estimated tax payment is due January 17th, 2023. So that's of course after the year because the fourth quarter ends in December. You got until January to make that payment. Other irs.gov resources are here. You've got the pay online provides complete tax payment information how and when to pay options, payment options. You got form 2210 under payment of estimated tax by individuals of states and trusts and form 2220 under payment of estimated taxes by corporations. So there's links to that stuff. There's links to all of this stuff that we talked about here. Very a lot of cool stuff we talked about and there'll be a link to this in the description.