When IRS first extended the filing deadline, they also extended the first estimated payment of the year. Initially they did not extend the second estimated payment, but they have since changed this, leaving a lot of taxpayers in a lot of confusion. Here are some of the most common questions about 2020 estimated payments clarified:
When are 2020 estimated payments due this year?
The first and second quarter payments for 2020 are now due July 15th of 2020. The third quarter estimated payment is still due September 15th of 2020, while the fourth quarter payment is due January 15th of 2021.
Do I have to make an estimated payment?
It depends on your work. If you are a minister, work an interim pastoral position, earn honoraria for weddings, funerals or other engagements, or run you own business, IRS expects payments throughout the year for the self-employment tax you accrue. That said, IRS does not really care if you make these payments by estimated payments or withholding, so you could have an employer over-withhold to cover both your income tax and your self-employment tax. If you are in doubt about whether you need to make estimated payments, consult your tax preparer.
Do I have to write separate checks for them?
No. You can write one check for both, or two checks. Just make sure to write on the memo line of the check which quarter(s) and year you want your payment applied to, otherwise IRS may apply it elsewhere. Also, make sure to put the primary social security number of the tax return on the memo line.
You can also pay on the IRS website if you prefer to pay electronically at https://www.irs.gov/payments.
How much should I pay for estimated payments?
Each quarterly payment should be one-fourth of your self-employment tax, so take your anticipated self-employment tax and divide it by four. If you are unsure how much your self-employment tax will be, a good rule of thumb is to take your self-employment income and multiply that by 15.3%.
For example, if your self-employment income is $10,000, 15.3% of that would be $1,530 of tax, so your quarterly payment would be $382.50.
One important note- don’t forget to include the full value of housing or parsonage allowance in that income total! These benefits are excluded from income tax calculations but added back in for self-employment tax calculations.
The July 15th deadline is coming soon, but Clergy Financial Resources is still accepting tax return requests. Visit our website at https://www.clergytaxnet.com/services/clergy-tax-preparation/how-to-get-started/ to get started on your 1040 return today!
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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