Then they will have to adjust for Q2. This risks them getting a small penalty.”ģ. “What I am telling clients in this situation is to look at their Q1 profit or pay 120% of their 2019 amount as a buffer. “I understand the safe harbor is hard to calculate if the return is due May 15, so instead make a good faith estimate of income and pay in a little more, then adjust in the future quarters if needed,” explained Andrew Schwartz, a CPA in New Jersey.īeth Logan, EA, who works with Kozlog Tax Advisers in Chelmsford, Massachusetts, and is past President of the Massachusetts Society of Enrolled Agents, explained that the problem is figuring out what clients should be paying in estimated taxes when the Form 1040 is not complete. For how much to pay by April 15, tweak the amounts used for the 2020 estimated tax payments based on the 2019 return or any early draft of the 202o tax year return. Pay estimated taxes on April 15, with a best guess estimate as to what is owed, while planning to file the tax return in May. For everyone else, he said that “we believe the penalty exposure may be limited.” In addition, he noted that many of his clients “haven’t sent in their documents, so that adds to the challenge of assessing any estimate calculations before April 15.”Ģ. Harold Forbus, Senior Tax Manager with Bogdan & Frasco in San Francisco, explained that his firm is focusing on clients who will have substantial Q1 estimates and will ask them to pay by April 15, particularly if the firm knows the Q1 estimates (e.g., based on stock option exercises) will be very large. “My only balk came from a tech-company client who didn’t want to have to sell his company stock to pay 2020 taxes now and wanted to wait until May 17 because his company stock was rising. “No one has balked at making that first estimate by April 15,” she continued. With two separate dates, “our concern has been client confusion over what to do on what date” she said. She explained to me that they pay estimated tax either quarterly or with each vesting to make up for the withholding shortfall. Randy Joseph, CPA in Seattle, WA with Joseph & Hetrick, has many clients with equity compensation, such as employee stock options and restricted stock units. ![]() That lets you make an accurate estimated tax payment and gets your tax return out of the way by the same date. Ignore the May 17 deadline and view April 15 as your tax-return due date. From my discussions with tax-return professionals, below are the four alternatives they see for their clients.ġ. Most people who pay estimated taxes base their payments on the income reported on their tax return to fit into the 100% or 110% safe harbors. What To Do About April 15 Estimated Tax Payments States that have income tax also have their own estimated tax requirements and safe harbors. If you don’t pay enough taxes, IRS Form 2210 helps you calculate any penalty for underpayment of estimated tax.
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