An estimated tax penalty is a fee that IRS can charge you if you don’t pay your taxes in smaller increments throughout the year. Most W-2 wage earners don’t realize it, but their withheld tax is being sent to the government by their employer on a quarterly, monthly or semi-weekly basis.
For self-employed individuals (like Clergy), IRS expects quarterly tax payments. If you fail to make these quarterly estimates timely, IRS can assess the estimated tax penalty based on how much was unpaid and how late it is.
Normally, estimated tax payment would be due April 15th, June 15th, September 15th and January 15th of the following year. 2020 is a bit unusual, though, due to the COVID-19 pandemic. Because of the pandemic, first quarter 2020 estimated income tax payments due April 15, 2020, and second quarter 2020 estimated income tax payments due June 15, 2020, have both been postponed to July 15, 2020.
So how can you avoid the estimated tax penalty? Make your estimated payments timely. If you mail payments, send them by certified mail so you have proof that the payments were sent timely. Make sure the money actually comes out of your bank account. If you make payments online, get an electronic receipt showing when the payments were made. This way even if IRS posts your payment to the wrong account or year, you can prove that you made the payments timely.
Clergy Financial Resources helps estimated next year’s estimated payments as part of our tax return service. For more information on hiring Clergy Financial Resources for your 2019 return, visit our website at https://www.clergytaxnet.com/services/clergy-tax-preparation/.
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.
For more information or if you need additional assistance, please use the contact information below.
Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: (763) 425-8778
Fax: (888) 876-5101