Do You Owe Estimated Tax Payments? Ghada Burton Discusses Changes in 2019 Under the New Tax Law
In general, individuals not subject to withholding tax deriving income from self-employment, dividends, interest, rents, alimony or other similar type income are advised to make estimated tax payments on a quarterly basis. Ghada Burton from San Francisco, California says failure to make such payments could subject you to interest and penalties.
This brief guide is not exhaustive nor intended as a tax advice. Taxpayers are advised to consult with their tax advisors for matters that apply to their individual situation.
Individuals must pay estimated tax for 2019 if both conditions are met:
1- You owe at least $1,000 in tax for 2019 (after withholding and credits)
2- Your credits are less than 90% of your 2019 tax liability or 100% of your 2018 tax liability whichever is less.
The dates for making estimated payments are as follows:
1- First payment on April 15, 2019 (which coincides with filing your 2018 tax return)
2- Second payment on June 17, 2019
3- Third payment on September 16, 2019
4- Fourth payment on January 15, 2020
But you do not need to make a payment in January 2020 if you file your 2019 tax return by January 31, 2020.
These payments are made in four equal installments, but you can make more than four payments, if the amount you pay during a payment period is at least equal to or greater than the amount required to be paid by the due date for that period.
What’s New in 2019:
When making your estimated payments, Ghada Burton says to consider what is new for 2019 and the impact of the Tax Cuts & Jobs Act which was signed into law in December 2017.
1- Standard deductions increased in 2019 for all filers. This is helpful if you do not itemize deductions. Here are the new amounts (assuming you are not claimed as a dependent by another person):
a- Married filing jointly of qualifying widow(er) $24,400
b- Head of Household $18,350
c- Single or Married filing separately $12,200
Your standard deductions will increase by additional amounts if at the end of 2019 you are:
a- Unmarried and are 65 years or blind $1,650
b- 65 years or older and blind $3,300
Married (filing jointly or separately) or a widow(er):
c- 65 or older or blind $1,300
d- 65 or older and blind $2,600
e- Both spouses 65 or older $2,600
f- Both spouses 65 or older and blind $5,200
Social Security Tax- The maximum earned income in 2019 subject to social security tax is $132,900.
Adoption Credits: Maximum adoption credits for employer-provided adoption benefits increased in 2019 to $14,080. Ghada Burton says this credit is available if your modified adjusted gross income is less than $251,160.
How to Make Payments:
Make your payment by check and mail to the IRS with your payment voucher. Remember that your payment must be post-marked on the due date to be considered made timely. Ghada Burton says for the second payment, ensure your payment is stamped by the post office no later than June 17, 2019.
Online Payments can be made as well; Ghada Burton says to go to IRS.gov/Payments, where electronic payments are accepted through direct pay, credit cards (a convenience fee is applied) or electronic fund withdrawals (EFW).
For added convenience, download the IRS2GO app and make payment from your phone.