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Do I have to make estimated tax payments?

tax problems Jul 19, 2021

The IRS philosophy is when you get paid, they get paid. If that does not happen, interest and penalties are assessed. You absolutely need to pay most of your tax bill during the year or as income is received. This is really an issue for self employed individuals, business owners and investors.

Many times, the reason these taxpayers don’t make estimated tax payments is because they don’t know how much to pay, when to pay or how to pay. The income from one year, may not be a fair representation of income of the following year, which makes it difficult to calculate how much tax to pay in. Another issue is that many taxpayers believe that estimated tax payments must be made Quarterly. This means that a realtor with sporadic commissions, is expected to hold a tax payment for an entire quarter and then make their estimated tax payment. By this time, they have paid current and past due bills from periods when they did not have the cash to make those payments.

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