Optima Tax Relief Explains the Importance of Quarterly Taxes

Underpaying taxes can result in a surprise bill during tax time or penalties. Taxpayers can avoid these consequences by making quarterly estimated tax payments. Typically, income taxes are paid during the year through withholding from paychecks, pensions, and other government payments. Self-employed taxpayers, investors, and some others often make quarterly tax payments.

Optima Tax Relief provides tips on making quarterly estimated tax payments.

• If you did not make a required quarterly tax payment, it is best to make a payment as soon as possible instead of waiting for the next quarterly deadline. Doing so will usually lessen, and in some cases eliminate, any penalties for nonpayment or late payment.
• If you owed tax during your last annual return, you may find this to be the case again when you file your next return. You may need to increase your withholding if you meet any of the following criteria:
• You itemized your deductions in the past, but are now taking the standard deduction
• You belong to a two-wage-earner household
• You are an employee with non-wage sources of income
• Your tax situation has become more complex
• In addition to your normal wages, be sure to include income from interest, investments, virtual currencies, refund interest, and gig economy income when calculating your taxable income.
• Unemployment compensation will be fully taxable in 2021. If you received compensation from the American Rescue Plan Act of 2021, and no federal income tax was withheld from these payments, an estimated tax payment should be made.
• Be mindful of end-of-year financial transactions that can affect your taxes, including annual bonuses, stock dividends, capital gain distributions, or profits earned from real estate.

Taxpayers can make estimated tax payments electronically through their IRS Online Account.