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Estimated taxes due Sept. 15, but House bill proposes calendar changes

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On a visceral financial level, we all hate paying taxes. But what we hate almost as much is that the tax laws often seem overly complicated or just plain goofy.

Take estimated taxes. These are four extra payments that the Internal Revenue Service and many states require taxpayers to make to cover the taxes due on earnings that aren't subject to paycheck tax withholding.

Straightforward enough, right? Until it comes to payment deadlines.

Even though there are, in most cases, four of them and they're called quarterly estimated tax payments, the IRS uses a calendar that's a bit off vis-à-vis the Gregorian one we use for everything else.

Those competing calendars, however, would change under a recently introduced tax bill.

Pay as you earn: The idea behind estimated taxes is clear enough. Our U.S. tax system is pay as you go (or earn), which is taken care of in wage-paying cases through income tax withholding from regular paychecks.

But when you get money as an independent contractor or from investment income or as a payoff from a winning lottery ticket, there's generally no withholding. Uncle Sam, however, needs the tax money due to keep paying for government services.

So instead of waiting for you to pay the due tax on these earnings in one lump sum when you file the year's Form 1040, the IRS wants it, like wage withholding, roughly when you get the money.

Hence, the quarterly estimated tax payments requirement.

Four extra payments: The IRS, however, doesn't use an estimated tax calendar in line with those on our electronic devices or, if you're like me, hanging on our walls or sitting on our desks.

It has its own schedule for when estimated taxes are due. And as the table below shows, only one, the first of the estimated payments, aligns with the usual three-month calendar quarter time frame.

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.


In addition to the holiday due date notation above, the IRS also does a little more calendar deadline manipulation.

The due date is not the payment date for taxpayers who snail mail actual 1040-ES vouchers. They can wait until the deadline days to send the ES form and money to the IRS.

As long as the envelopes have a U.S. Postal Service postmark for the appropriate deadline, the IRS will consider the payments as on time even though they arrive after the deadline.

But not strictly quarterly: Now back to the quarterly estimated tax moniker. They're called that simply because there are, usually, four of them. Not because they are calculated and paid according to the standard annual calendar quarters.

As for why the IRS and regular calendars aren't in sync, I honestly can't tell you.

I've been paying estimated taxes for decades and have never been able to track down why the not-quite-quarter deadlines were chosen. If any tax historians are reading this post, please let me and the ol' blog's readers know in the comments below.

Truing up tax and other timetables: What I do know is that some members of Congress want to change the estimated tax calendar.

Rep. Debbie Lesko (R-Arizona) has introduced H.R. 4214, also known as the Tax Deadline Simplification Act. It would change the currently not-really-calendar-quarter estimated tax payment deadlines to the uniform quarterly schedule with which we're all familiar.

Specifically, the bill would move estimated tax installment deadlines to 15 days after the end of each calendar quarter. That would mean, if H.R. 4214 eventually becomes law, the estimated tax payment calendar would look like this:

Payment #

Due Date

For income received in

1

April 15

Jan. 1 through March 31

2

July 15

April 1 through June 30

3

Oct. 15

July 1 through Sept. 30

4

Jan. 15 of the next year

Oct. 1 through Dec. 31


The deadline shifting to the next business day when the 15th is on a weekend or federal holiday would remain.

Calendar mess_GiferEasing calendar confusion: Lesko, in a statement when she introduced the bill, says she did so because the current uneven intervals for quarterly tax payments "can cause confusion and negatively affects gig economy and self-employed workers."

Rep. Bradley Scott Schneider (D-Illinois), an original cosponsor of the bill, added that changing the current deadlines to occur on an even basis is a common sense move that will help not only individual filers, but also small business, estate, and trust taxpayers.

Plus, making the payments due for the calendar quarters we already use would improve compliance and reduce unintentional taxpayer errors, say the bill's supporters.

Speaking of supporters, Lesko so far has a small, but bipartisan, House group behind her effort. In addition to Schneider, Reps. David Schweikert (R-Arizona) and Ed Case (D-Hawaii) also have cosponsored the bill.

Beyond Capitol Hill, the Tax Deadline Simplification Act has even more cheerleaders in the tax community. Lesko says groups backing H.R 4214 include the American Institute for Certified Professional Accountants, Arizona Society of Certified Professional Accountants, Latino Tax Professionals Association, National Society of Tax Professionals, Padgett Business Services, National Conference of CPA Practitioners, National Society of Accountants, National Association of Tax Professionals, and Optima Tax Relief.

I'll keep an eye on the legislative progress of the estimated tax payment calendar change bill, which is pending in the House Ways and Means Committee, and let you know if it ever becomes law.

Estimated tax payment time again: Until then, though, we're still obligated to meet the existing due dates or face potential penalties and interest charges. Just to be clear, that's those shown in the first table in this post.

And one of those deadlines is almost upon us. The third estimated tax payment for tax year 2021 is due, for most of us, next Wednesday, Sept. 15.

The "for most of us" disclaimer is necessary because taxpayers in several states have some added time since they were in the paths of several recent major natural disasters. That's the case for:

  • Michigan residents who endured severe storms, flooding, and tornadoes, now have until Nov. 1 to meet a variety of tax deadlines, including estimated taxes usually due this month;
  • Mississippi taxpayers in Hurricane Ida's path also get until Nov. 1 to file estimated and other taxes;
  • California wildfire victims have until Nov. 15 to fulfill estimated and other tax tasks; 
  • North Carolina residents in several counties struck by remnants of Tropical Storm Fred have until Dec. 15 to file estimated and other taxes;
  • Tennessee taxpayers struck by severe storms and flooding have a new Jan. 3, 2022, due date for, among others, estimated tax payments; and
  • Other Hurricane Ida affected filers in Louisiana, New Jersey, New York, and Pennsylvania also have until Jan. 3, 2022, to meet estimated and several other tax filings.

If you live in those disaster areas, I hope your recovery is going well. Focus on that and take all the time you need and the IRS is giving you to get to your tax tasks.

The rest of us, though, need to meet the Sept. 15 estimated tax deadline, which also is this week's By the Numbers figure.

And with that, I'll let you go and figure out what tax you owe the U.S. Treasury for the money you got sans withholding in the months of June, July and August.

You also might find these items of interest:

 

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