Do you have enough witholding?

Part 2

THE US tax system is on a pay-as-you-go basis. Taxpayers are required to pay most of the tax liabilities during the same year they earn the income. If you pay less than 90 percent of your taxable income for the current year, you will be assessed with estimated tax penalty plus interest for each quarter you underpay the required quarterly estimated tax for both Federal and State.

• Pay Quarterly: If you have other income not subject to withholding, you are generally required to pay quarterly estimated taxes. Most of the other income includes rental income, self-employment, capital gains, dividends, sharing economy, and other sources.

• Estimated Taxes Due Dates: The quarterly estimated taxes are due on April 18, 2018 for the 1st quarter, June 15, 2018 for the 2nd quarter, September 17, 2018 for the 3rd quarter, and January 15, 2018 for the 4th quarter for the tax year 2018. If you are expecting a refund and have underpaid 1st and 2nd estimated taxes you can still choose to apply refund to 2018 estimated taxes as you file your 2017 tax return if you are on extension. If you have filed an extension, last day of filing will be on or before October 15, 2018. Visit your corresponding state website for the state requirement. If you live in California visit https://www.ftb.ca.gov/individuals/

• Form W-4: If you are an employee who receives income from other sources, you may increase the amount of withholding from your paycheck instead of paying estimated taxes. Complete a new Form W-4 to reflect the changes in the a) personal allowance worksheet, b) deductions, adjustments, and additional income worksheet, and c) two-earners/multiple jobs worksheet. Refer to our previous week column utilize the IRS withholding calculator. Visit https://apps.irs.gov/app/withholdingcalculator/ and your corresponding state website. The new tax law could have an impact on how much your employer should withhold from your paycheck. Too little withholding from your paycheck could mean large unexpected tax bill as you file your tax return in 2019 for Tax Year 2018.

• Form W-4P: If you receive pension and annuities to reflect changes complete a new Form W-4 to reflect the changes in the a) personal allowance worksheet, b) deductions, adjustments, and additional income worksheet, and c) multiple pensions/more than one income worksheet and submit to your payer.

• How to Pay: You can pay estimated taxes by increasing your paycheck withholding, mail a check payable to the United States Treasury, or electronically using IRS Direct Pay https://www.irs.gov/payments/direct-pay or through Electronic Federal Tax Payment System EFTPS https://www.irs.gov/payments/eftps-the-electronic-federal-tax-payment-system. For more options visit https://www.irs.gov/payments.

If you live in California visit: individual: https://www.ftb.ca.gov/online/webpay/index.asp

And business: https://www.ftb.ca.gov/online/webpay/Business

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Disclaimer: Any accounting, business or tax advice contained in this communication is neither intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.

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Al-os & Associates  Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.    

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