ATS | Advocate Tax Solutions | Back Tax Help & Why should I be making estimated tax payments to the IRS

Estimated tax payments are required by the Internal Revenue Service and a majority of the State Taxing Authorities. While the IRS has nationwide guidelines for estimated tax payments, each State has its own requirements.

The IRS requires that all self-employed individuals who earned over $1,000 in self-employment income make estimated tax payments.  Estimated tax payments are a method used to collect and pay taxes on income that is not subject to withholding. This most commonly affects; those who run their own business, the self-employed individual who is paid directly by a customer after performing a service and/or those individuals who work for a company but are issued a 1099-MISC each tax year. The IRS will require estimated tax payments as a part of compliance prior to allowing ATS to negotiate any resolution.

As self-employed individuals do not have taxes withheld from their paychecks, they are required to submit estimated tax payments to the IRS on a regular basis.  The purpose of estimated tax payments is to ensure that your tax liability is paid off during the year and that no balance is due when filing your tax return. Estimated tax payments basically allow you to split your expected tax liability into parts and pay it off in smaller segments over the tax year rather than paying the amount in full when you file your tax return.

It is important to remember that estimated tax payments pay off your tax liability for the current tax year, they do not help on back taxes that arose from previous years. That means if you begin to make estimated tax payments in 2013, they will be applied to your 2013 IRS Master File and reduce the tax liability balance on your 2013 Federal Tax Return. It is best to think of estimated tax payments as an untouchable savings account with the IRS. Once you make an estimated tax payment, the money will stay your IRS account for that year and will not be moved or applied to any other year.

The IRS requires that estimated tax payments be made every quarter (4 times a year). The required due dates for the 2012 estimated tax payments were:

1^st quarter 2013:               Due 4/17/2013

2^nd quarter 2013:              Due 6/15/2013

3^rd quarter 2013:               Due 9/17/2013

4^th quarter 2013:               Due 1/15/2014

 

While payments are required quarterly, it is strongly suggested that you make your estimated tax payments every month to establish it as part of your routine. The easiest method to calculate the amount of your estimated tax payments is to base it upon the tax due on your prior tax return.  You can look at your last filed IRS Tax Return to determine the tax due. Take the amount listed as tax due and split it into twelve (12) monthly estimated tax payments or four (4) quarterly estimated tax payments. This is the amount of the required estimated tax payment that you should be making each monthly or each quarter. Once again, it is suggested that you make your estimated tax payment monthly, not quarterly.

The IRS does charge a penalty for underpayment of estimated tax. This penalty is normally imposed if you fail to make estimated tax payments or if you fail to make sufficient estimated tax payments. The IRS will generally not impose this penalty if you owe less than $1,000 in tax after subtracting the estimated tax payments made, or if you made estimated tax payments equal to at least 90% of the tax due for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen.

Estimated tax payments can also assist in reducing your disposable income which may lead to a tax payer going Currently Non-Collectable, or reducing the amount of an Offer in Compromise.

You can refer to IRS Publication 505 or call Advocate Tax Solutions, LLC at 888-737-0200 to learn more about estimated tax payments and other preventative measures to ensure a tax-free 2013 Tax Year.  Advocate Tax Solutions, a tax resolution firm headquartered in the Chicago Metropolitan Area,  our team of Tax Attorneys and CPA’s specialize in back tax preparation,  and back tax resolution .

Received a notification from the IRS regarding a Notice of Federal Tax Lien? Don’t panic, but don’t ignore it!

Received a notification from the IRS regarding a Notice of Federal Tax Lien? Don’t panic, but don’t ignore it!.

Received a notification from the IRS regarding a Notice of Federal Tax Lien? Don’t panic, but don’t ignore it!

Receiving a notification from the IRS is not a pleasant experience, especially if you owe back taxes.  Most IRS notices arrive unexpectedly, are filled with language that may make the notice hard to understand, and may contain certain deadlines that could directly impact your near future finances.

When an issue with the IRS arises, such as paying a tax return with a balance due, you are likely to get a letter from the IRS.  The first letter is just a “notice”, informing you that you have a past due balance that needs to be addressed.

At this point, don’t panic!  The IRS will not be garnishing your wages tomorrow or next week.  The IRS will send you a notification, followed by a Notice of Intent to Levy, and concluded with a Final Notice of Intent to Levy.   Enforced collection efforts will likely begin after a Final Notice of Intent to Levy is received.

However, don’t ignore the IRS notice!  By receiving this initial IRS notification, please be aware that you are on the IRS’ radar.  Although you may not have your wages garnished or bank account levied in the next few days, if you do not take preventive measures to resolve your IRS back tax liability or seek help from an attorney, CPA or enrolled agent, your issues will certainly escalate down the road.

Consider the time between receiving a notification and a Final Notice of Intent to Levy a great time to obtain some representation so you can resolve your tax obligation under the resolution that best suits you!  Advocate Tax Solutions (ATS) can request a stay of enforcement in an attempt to temporarily halt any new liens and levies from happening if they have not already occurred while they prepare a proposal to resolve the back tax debt.  The resolution will be based on a thorough analysis of your financial position enabling a settlement based on disposable income.

For a Free & Confidential Consultation or to learn more about your options contact Advocate Tax Solutions, LLC toll free at (888) 737-0200.