It's Tax Time! Estimated Tax Payments are Due
Now is the time to file your taxes and make your estimated tax payment by the deadline.
Both your individual tax return AND first quarter estimated tax payment are due by Monday, April 18th. Here is what you need to know.
First quarter due date: Monday, April 18, 2022
The estimated tax payment rule: You are required to withhold or prepay throughout the 2022 tax year at least 90 percent of your 2022 total tax bill, or 100 percent of your 2021 federal tax bill. * A quick look at your 2021 tax return and a projection of your 2022 tax obligation can help determine if a quarterly payment might be necessary in addition to what is being withheld from any paychecks.
Things to consider:
Underpayment penalty. If you do not have proper tax withholdings throughout the year, you could be subject to an underpayment penalty. A quick payment at the end of the year may not be enough to avoid the underpayment penalty.
W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 wage withholdings to make up the difference.
Self-employed. In addition to paying income taxes, self-employed workers must also pay Social Security and Medicare taxes. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter to pay your estimated taxes.
Use your refund? An alternative option to pay your 2022 first quarter estimated tax is to apply some or all of your 2021 tax refund.
Pay more in the first quarter. By paying a little more than necessary in the first quarter, you can be in a position to adjust future estimated tax payments downward later this year if your 2022 tax obligation appears that it will be lower than you originally thought.
Not sure if you need to make a quarterly payment? Take a quick look at your 2021 tax return to see the amount of tax you paid. Divide the tax by the number of paychecks for the year. Is enough being withheld from your paycheck? Consider adjusting your withholdings with your employer if you think it is necessary to cover your 2022 tax bill.
* If your income is more than $150,000 ($75,000 if married filing separate), you must pay 110 percent of your 2021 tax obligation to be safe from an underpayment penalty on your 2022 tax return.
