#Middlebury #MarkBurns #DiversifiedTaxTidbits
by Mark A. Burns
Nobody likes to pay taxes, but paying them is a fact of life. If you are a W-2 employee or are receiving certain other income streams that allow taxes to be withheld by the payer (e.g. , IRA or pension distributions, social security benefits, etc.) and you have sufficient taxes withheld to cover your full tax liability, then this topic may not apply to you. But for those people who are self employed and/or have other significant sources of income (e.g., investment income, capital gains, rental income, etc.) this topic may be of greater importance.
If you are in the latter category, then you generally are required to make quarterly estimated tax payments to the IRS. There are numerous ways you can do this, including:
- You can mail in quarterly vouchers with payments.
- You can authorize the IRS to debit your bank account each quarter for amounts you specify to satisfy your estimated tax payment requirements for the following year. (e.g., when your 2017 tax return is filed early in 2018, you can give the IRS instructions for your 2018 payments). But this option can be selected only as your tax return is being filed, not at a later date.
- In addition, the IRS has a relatively new Direct Pay system that seems to be working well. You use this system by going to IRS web site and following the procedures to have the IRS debit your bank account per your instructions.
- Finally, you can pay your taxes via credit card, but to do that you need to go through a third-party processor and pay a “convenience” fee. Many people like to use their credit card for payments in order to earn points on the card, so in this case you need to evaluate the amount of the fee (which is sometimes a percentage of the payment amount) versus the benefit you expect to receive from the points earned.
In addition to making quarterly estimated tax payments, the above methods also can be used to pay balances owed on your tax return. Methods 3 and 4 also are available via the official IRS mobile app, “IRS2Go.”
Also, a word of caution – if you owe the IRS money, do not ignore their demands for payment. The IRS does not go away and will get aggressive with collection steps if you ignore them. On the other hand, they have a very flexible installment payment plan and as long as you stick to an agreed-upon monthly payment plan, they will not harass you. In most cases, past-due tax balances will accrue interest and penalties until paid in full.
More information about the above options as well as other related issues can be found at IRS.gov when you click on “Pay Your Tax Bill.”
Always consult a tax professional if you are uncertain about how tax matters might affect you.
READERS: Do you have a tax topic you would like Mark Burns to discuss in this column? If so, please send your column idea to Mark@DFSPC.biz.
Mark A. Burns, M.B.A., is a C.P.A. with Diversified Financial Solutions PC in Southbury. He can be reached at 203-264-3131 or Mark@DFSPC.biz.
