Estimated tax payments for Federal and Statement taxes.  When should I make them and other considerations:

It may be necessary for you to consider making estimated tax payments when your withholding form you paycheck or other sources of withholding such as from a retirement plan are not sufficient to cover 90% next year's Federal tax liability.  Your full year tax liability is due on April 15 of the following year.  The estimated payment rules apply most often to individuals who are self-employed or receive most of their income from rents, interest, dividends or other sources of income from which tax withholding are not made.  State rules tend to follow Federal but may vary.

When their are two wage earners in a family often the normal withholding rates are not sufficient to cover their combined tax liability due to the stacking effect of the individual tax brackets so estimate payments are an option for them as well.  Generally, estimated payments are made on a quarterly basis.  These payments are required when your tax withholding is not sufficient payoff your federal and state income tax liability at the end of the year.  Keep in mind that your estimated payments are only required to cover 90% of your Federal current year taxes and the remainder can be paid with your return or extension.  Rules for a particular State may vary.  Figuring your estimated tax payments on a quarterly basis is important to ensure that you do not incur an underestimate of tax penalty.  Blue Ridge Tax can help you with this computation.

When to send payments 

For almost all taxpayers, the due date for the first estimate payment of each year is the same day their personal tax return is due for the prior year. Future payments are due June 15, September 15, and January 15 of the next year. You'll want to make note the following items:

• If you owe money with your tax return, and have to make an estimated tax payment, you have to write separate checks on April 15.  Be sure to properly budget so you will have cash on hand to make the necessary payments.  Even if you extent your return, all taxes must be paid by April 15th.
• Even though the estimated tax payments are called "quarterly," payments, they aren't three months apart. The second payment is due June 15th which is only two months after the first one.
• If the regular payment date falls on a weekend or legal holiday you are not required to make your payment until the first day that isn't a weekend day or holiday.  Due to certain State holidays estimated payments where not due for 2010 until April 18, 2011.
• Tax payments are considered timely if they are postmarked by the due date of the payment.  Consider using certified mail for your payments.  Private delivery services such as Fed-Ex can also be used to send your payment.
• Most states also require tax estimate payments which usually correspond with the Federal payment due dates for estimated payments (Virginia uses the Federal Schedule) but be sure to check your States schedule.
• Individuals that take advantage of itemized deductions should consider a prepayment in December of their State tax payment due in January of the following year.  Making your quarter four estimated tax payment early in the month of December rather than waiting until January will allow you to deduct that payment on the current year tax return thus generating a tax deduction early.  Be careful of alternative minimum tax rules which disallow state deductions.
• It is very import to keep track of all of the payments your have made included any refunds applied from the prior year and give these amounts to your accountant to ensure that every you have paid is credited on your return.  Missing payments one your return will only complicate your life and result in the government sending you tax notices which will take a lot of time to resolve.  This seems like a very simple and straight forward item, but you would be surprised by how many clients have not kept records of payments leading to uncertainty when filing the client's return.
• Residents of Virginia, Maryland and the District of Columbia should send there estimated tax payments to:

Internal Revenue Service

P.O. Box 970006

St. Louis, MO  63197-0006

What to file

When you file your estimated payments it will be necessary for you to included a completed tax estimate voucher Form 1040-ES.  This paperwork is used as a transmittal voucher to ensure that your tax payment is properly credited to your tax account.  This voucher is fairly simple and only requires your name, address and social security number and the amount you are paying is requested on the form.

• After you make your first tax estimate payment, the Internal Revenue Services will start mailing you tax vouchers with your social security number, address, name and other taxpayer data already preprinted on the voucher.  Even if this is your first year paying estimates, the IRS will send pre-printed forms for the next due date.  You're under no obligation to file with these forms as your accountant will often provide you tax vouchers out of their computer system or you can print them out of TurboTax at home.  No worries if your payment vouchers get lost.  However, do keep in mind that the actual IRS vouchers are useful in assuring that the IRS properly credits your payment to your account so you should use the IRS forms if you can..
• Tax Estimate payments are filed to a different address than you tax return and should always be mailed separately.  Be sure to write you name, tax year and social security number on the check which helps the IRS properly apply your tax payment to your account

Tax estimate payments are self assessed and require a certain amount of judgment and projection of your full year results.  The IRS will not "audit" your tax payments and a signature is not even required on the form.  When you send it in, you're estimated tax payment you are not make any guarantee to the IRS rather you are just making a prepayment on your account to avoid the assessment of underpayment penalties.

You can choose the means and the timing of the payments if you find that's works better for you.  For example, if your estimated payments are small and you don't want to worry about them latter in the year consider paying everything during the first quarter due April 15.  While this is not the most effective way to make your tax payments is will give you piece of mind.  The IRS will still send you the remaining vouchers but you have nothing to be concerned about if you have already fully meet your tax obligations.  Keep in mind that estimated tax payments are very fluid and your schedule of payments should be reviewed for any quarter in which there has been a significant change your earning or sources of earnings.

Contact Blue Ridge Tax if you require any assistance in making your estimated tax payments or wish to discuss other income tax matters.  Primary service areas include by not limited to all of Loudoun, Arlington and Fairfax Counties, Leesburg, Ashburn, Sterling, Reston, Herndon and Mclean.