The deadline for making a payment for the fourth quarter of 2019 is Wednesday, January 15, 2020. Taxpayers who paid too little in 2019 can still avoid the "tax-time surprise" by making a quarterly estimated tax payment.
Income taxes are pay-as-you-go, meaning that by law, taxpayers are required to pay most of their tax during the year as income is received. There are two ways to do this:
1. Withholdings from paychecks, pension payments, SS benefits or certain government payments. This is how most people pay their tax.
2. Making quarterly estimated tax payments throughout the year. Self-employed people and investors often pay this way.
Either method can help avoid a tax bill that comes with accompanying penalties. If a taxpayer misses these payments earlier in the year, making a payment, as soon as possible, will help lessen and may even eliminate a penalty.
The IRS recommends that everyone check their possible tax liability by using the IRS Tax Withholding Estimator. This and Form 1040-ES helps taxpayers in figuring out the right amount to pay as well. This is especially important for those who owed taxed when they filed their 2018 return. Taxpayers may include those who itemized in the past but will now claim the increased standard deduction, as well as two wage-earner households, employees with non-wage sources of income and those with complex tax situations.
In addition, various financial transactions, especially late in the year, can often have an unexpected tax impact. Examples include year-end holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, real estate or other property sold at a profit.