In 2015, 10 million people were hit with failure to pay estimated tax penalties in Georgia and across the nation. This was an increase from 7.2 million in 2010. While penalties differ for each taxpayer, it could add hundreds of dollars to a tax bill. Those who derive income both from an employer and side gigs may benefit by increasing their withholding or making payments throughout the year.
It is important to understand that the tax system requires people to make most of their tax payments as they go. This means that taxpayers are generally required to pay as they make money as opposed to at the end of the year. Those who pay at least 90 percent of their estimated taxes during the year avoid paying interest on any remaining balance owed. The amount that a person pays in estimated taxes in a given year is usually based on what he or she made in the previous year.
Individuals who are unsure about how much to withhold each pay period can use an online calculator for assistance. Estimated payments are due on the 15th of April, June and September. The final payment for a given tax year is due in January of the following year. Extensions may apply if that date falls on a Saturday or a holiday.
There is an IRS worksheet on how to determine the proper amount of estimated tax payments on the instructions for IRS Form 1040-ES: https://www.irs.gov/pub/irs-pdf/f1040es.pdf
There are also many guides on the internet for how to calculate estimated tax payments, such as: https://www.taxcrisisinstitute.com/how-to-estimate-taxes-owed/
If an individual fails to pay income taxes, it may result in wages being garnished or assets being seized. Taxpayers may be able to have an attorney respond to any notices that they receive. This may be beneficial for those who feel as if they might say too much or feel intimidated by talking with government officials. An attorney may be able to reduce the amount that a person owes or even obtain a refund in some cases.