I know all y'all are fixated on tonight's $1.5 billion Powerball drawing and that lottery jackpot's tax implications.
But many of you -- including me! -- also must remember to meet the deadline for our final 2015 estimated tax payment. That's coming up on Friday, Jan. 15.
Paying on untaxed income: Estimated tax payments are required when you get income, both earned (for example, self-employment as your main source of income or from side jobs to your salaried work) and unearned (such as various investment earnings) on which no taxes are withheld.
And yes, if your Powerball numbers come up tonight or you get any other gambling winnings or prizes, you'll have to pay estimated taxes on those, too.
Basically, taxes are due on all those many sources of money and, since we have a pay-as-you-go tax system, the Internal Revenue Service wants it as soon you get it.
Estimated time table: OK, the IRS doesn't demand what's due on this untaxed money immediately upon your receipt of it. But Uncle Sam wants his cut of your cash within four specified periods, as the table below shows.
|Payment #||Due Date*||For income received in|
|1||April 15||Jan. 1 through March 31|
|2||June 15||April 1 through May 31|
|3||Sept. 15||June 1 through Aug. 31|
|4||Jan. 15 of the next year||Sept. 1 through Dec. 31|
*If the 15th is on weekend or federal holiday, the estimated payment is due the next business day.
If you don't make the tax payments within the appropriate quarter, you could face a late payment penalty even though you eventually paid your full tax amount on the income.
Ways to pay estimated taxes: The good news is that you can meet the deadlines by making electronic payments, either through Direct Pay or, if you've set up an account, the Electronic Federal Tax Payment System (EFTPS).
You also can pay with a credit or debit card by using one of the IRS' authorized payment vendors. Note, though, that there's a fee involved (it goes to the vendor, not the IRS) for the processing of these payments.
If you prefer to send in a check, then you'll need to download the Form 1040-ES package and send in the appropriate payment voucher -- the one due on Jan. 15 is the fourth, and final, one of the tax year -- to the mailing address show in that document.
As long as your snail mailed payment is postmarked by Jan. 15, the IRS considers your payment for the estimated tax period as being made on time.
Whichever way you choose, just make sure you get the money in on time. There's never a good reason for paying the IRS more than you have to, especially when it's in the form of an avoidable penalty.
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