Posts Tagged ‘Form 2210’

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Are You Paying The Correct Amount of Income Taxes Each Quarter????

Tuesday, June 8th, 2021

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

The Federal and state income tax systems are structured on a “pay-as-you-go” basis.  This means that everyone is expected to have deposited one-fourth of their ESTIMATED annual tax liability each and every quarter.  This can be accomplished by at least two different methods 1) payroll deductions on your behalf by an employer, or 2) making quarterly “Estimated Tax Deposits”.  You can also use any combination of these two methods as long as the end result is achieved.  You can also use the “Electronic Federal Tax Payment System”, which is both free and accurate – Welcome to EFTPS online 

To permit you to continuously calculate and update your annual projected tax liability for the year, throughout the year, you can use the soft copy of your last filed-and-accepted tax returns to perform the calculations for you – 1) open the filed-and-accepted tax return file, 2) save it as a new and different file name, 3) enter the financial data for the current tax year, 4) divide the annual “tax liability” by four, 5) save the file for future reference.

If you do not meet the Federal guidelines, there could be interest and penalties.  However, you will need to complete Federal tax form 2210 to make this determination ( 2020 Form 2210 (irs.gov) )  IF your monthly and quarterly income was not relatively even throughout the year (i.e. you received a large salary bonus, you were promoted and also received a salary increase, you sold investments, or you received your “Required Minimum Distribution” (RMD), etc) you can use the same form to “annualize” your estimated income for the current tax year.

The IRS does have “Safe Harbor Rules” –

” The estimated safe harbor rule has three parts:

  • If you expect to owe less than $1,000 after subtracting your withholding, you’re safe.
  • If you pay 100% of your tax liability for the previous year via estimated quarterly tax payments, you’re safe. …
  • If you pay within 90% of your actual liability for the current year, you’re safe.”

(more…)

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Important Information on Late Filing and Late Payment Penalties

Thursday, April 18th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

It is not possible to determine the number of taxpayers who do not fully understand all of  the requirements to ensure that your quarterly estimated  tax payments, annual tax liability, and filing deadlines have been fulfilled.  The tax system for the United States is based on a “pay-as-you-go” expectation.  Among the key provisions that affect all of us are:

1.  The Department of the Treasury requires that all taxpayers deposit one fourth of their annual income tax liability each quarter;

2.  The annual tax liability can be fulfilled in several ways, i.e. payroll withholding from wages, voluntary tax withholding from lump sum payments (sales of investments, withdrawals from retirement plans, etc) or through quarterly estimated tax deposits ( http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes and http://www.irs.gov/uac/Newsroom/Six-Tips-on-Making-Estimated-Tax-Payments);

3.  IRS Form 2210 is required to be completed and filed if you have not met the quarterly and annual requirements.  However, there are “safe harbor rules” and exceptions which could provide you with a waiver (http://www.irs.gov/instructions/i2210/ch01.html#d0e151 ) of the tax penalties and interest;

4.  While you may request an automatic six-month waiver of the tax return filing deadline, this waiver does NOT extend the deadline date for the payment of  your annual income tax liability.    (more…)

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Are You Meeting Your Quarterly Tax Deposit Obligations?

Saturday, April 2nd, 2011

This subject has been one of the toughest for past clients, other taxpayers, and my college students to comprehend.  This is especially true when discussed in conjunction with the submission of a request for an automatic six-month extension for the time to file a tax return.  The logic is usually communicated in some variation of “I just requested a six month extension for filing my tax return, so I now have six months in which to find the money to pay the taxes that I owe.”  That’s not exactly the way that the system works.  Under certain circumstances, you could be required to have a mandatory 28% of your income withheld to fulfill the “backup withholding” requirements.

The United States income tax system is structured on a “pay-as-you-go” basis.  This means that your income taxes must be paid as you earn or receive your income throughout the year.  You can fulfill this requirement in either one of two ways, which includes a combination of both: 1)  through the payment of Federal (and State) withholding, or 2) by making quarterly estimated tax payments.  If you do not pay your quarterly taxes through withholding taxes or do not pay enough in taxes using that method, you may also be required to make quarterly estimated tax payments.  If the total of all of your tax payments for the year were not paid (remitted) either through withholding or estimated tax payments, you may incur both an underpayment tax penalty and interest for the underpayment of your annual estimated tax obligation. (See the instructions for completing Form 2210).  Addtional information can be obtained from Tax Topic 306. 

The easiest method to meet this requirement is through the Electronic Federal Tax Payment System (EFTPS).  There is usually a State equivalent.  You can apply and enroll online at http://eftps.com  The website allows you to designate a bank account from which the funds will be withdrawn electronically.  You can also set up future, recurring quarterly payments and amounts.  Not sure of the amounts?  The system can accomodate changes/updates 24 hours or more in advance of the due date.  If you don’t want the U.S. Treasury to have access to your personal bank account, then contact your bank and set up a separate account just for your tax payments.  There is usually no addtional cost for this account.  If there is, join a credit union!   (more…)

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