by Jim Magary | Apr 6, 2015 | Tax Help
Tax Withholding and Estimated Tax, What You Need to Know
If you are an employee, you usually will have taxes withheld from your pay.
If you don’t have taxes withheld, or you don’t have enough tax withheld, then you may need to make estimated tax payments.
If you are self-employed you normally have to pay your taxes this way.
1. When the tax applies.
You should pay estimated taxes in 2015 if you expect to owe $1,000 or more when you file your federal tax return next year. Special rules apply to farmers and fishermen.
2. How to figure the tax.
Estimate the amount of income you expect to receive for the year.
Also make sure that you take into account any tax deductions and credits that you will be eligible to claim. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.
3. When to make payments.
You normally make estimated tax payments four times a year.
The dates that apply to most people are April 15, June 15 and Sept. 15 in 2015, and Jan. 15, 2016.
4. When to change tax payments or withholding.
Life changes, such as a change in marital status or the birth of a child can affect your taxes. When these changes happen, you may need to revise your estimated tax payments during the year.
If you are an employee, you may need to change the amount of tax withheld from your pay. If so, give your employer a new Form W–4, Employee’s Withholding Allowance Certificate.
You can use the IRS Withholding Calculator tool help you fill out the form.
5. How to pay estimated tax.
Pay online using IRS Direct Pay. Direct Pay is a secure service to pay your individual tax bill or to pay your estimated tax directly from your checking or savings account at no cost to you.
You have other ways that you can pay online, by phone or by mail.
Visit IRS.gov/payments for easy and secure ways to pay your tax. If you pay by mail, use the payment vouchers that come with Form 1040-ES.
by Jim Magary | Apr 6, 2015 | Tax Help
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by Jim Magary | Apr 6, 2015 | Tax Help
Easy E-Pay People Who Owe Tax
It’s easier than ever to pay their taxes electronically, and for those who can’t pay on time, quick and easy solutions are available.
Taxpayers who owe taxes can now choose among several quick and easy e-pay options, including the newest and easiest, IRS Direct Pay.
Available options include:
Direct Pay.
Available at IRS.gov/directpay, this free online tool allows individuals to securely pay their income tax directly from checking or savings accounts without any fees or pre-registration.
No need to write a check, buy a stamp or find a mailbox.
Payments can even be scheduled up to 30 days in advance, and the tool is available round the clock. Any taxpayer who uses the tool receives instant confirmation that their payment was submitted.
Electronic Federal Tax Payment System.
This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-316-6541 or visit www.eftps.gov.
Electronic funds withdrawal.
E-file and e-pay in a single step.
Credit or debit card. Both paper and electronic filers can pay their taxes by phone or online through any of several authorized credit and debit card processors. Though the IRS does not charge a fee for this service, the card processors do.
Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” Also, print on the front of the check or money order: “2014 Form 1040”; name; address; daytime phone number; and Social Security number.
To help insure that the payment is credited promptly, also enclose a Form 1040-V payment voucher.
The IRS advises taxpayers to file either a regular income tax return or a request for a tax-filing extension by this year’s April 15 deadline to avoid stiff late-filing penalties.
Taxpayers who owe, but can’t pay the balance in full, do have options. Some taxpayers may qualify for payment plans and other relief.
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by Jim Magary | Apr 6, 2015 | Tax Help
Required Retirement Plan Distributions
Taxpayers who turned 70½ during 2014 that in most cases they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Wednesday, April 1, 2015.
The April 1 deadline applies to owners of traditional IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457 plans.
The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31.
So, a taxpayer who turned 70½ in 2014 and receives the first required payment on April 1, 2015, for example, must still receive the second RMD by Dec. 31, 2015.
Taxpayers who turned 70½ during 2014 must figure the RMD for the first year using the life expectancy as of their birthday in 2014 and their account balance on Dec. 31, 2013.
A trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Worksheets and life expectancy tables for making this computation can be found in the Appendices to Publication 590-B.
Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70½ in 2014 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer’s only beneficiary.
Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD.
Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulation in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.
The IRS encourages taxpayers to begin planning now for any distributions required during 2015.
An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner.
Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2015 RMD, this amount would be on the 2014 Form 5498 that is normally issued in January 2015.
by Jim Magary | Apr 6, 2015 | Tax Help
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