We have received numerous inquiries regarding the recently provided tax calendar and the upcoming February 1st deadline mentioned in the newsletter. To clarify, the deadline for your 2020 individual tax filing remains April 15th, 2021.
The 2020 fourth quarter Federal estimated tax payment installment for individuals was due to the IRS by January 15th, 2021. Taxpayers that underpaid their fourth quarter installment originally due January 15th, may be assessed an underestimated tax penalty on their 2020 tax return for failure to properly pay estimated tax payments. However; the IRS allows an exception for any individual that files their 2020 income tax return and pays all applicable tax due prior to February 1st. To note, the IRS is not accepting individual tax returns for electronic filing prior to February 12th, 2021. Any taxpayer wishing to file their return prior to February 1st will be required to paper file the return.
As a reminder, taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, apital gains, prizes, and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax but other taxes such as self-employment tax and alternative minimum tax.
Should you have any questions regarding estimated tax payments please reach out to your advisor at Romano & Associates.