Don’t Let the IRS Dampen Your Holiday Spirit!
You are probably in full swing with the holiday spirit. Carols are being sung, lights are shining brightly, and the shopping madness has begun. Hopefully this is a joyous time of the year for you and the people you care about. However, one letter from the IRS could ruin your holiday cheer as quick as running into Ebenezer Scrooge himself.
Popularity for delivery services are growing at lightening speed and that means individuals being paid as 1099 employees are also increasing. I know a young man that was away at school and working for a food delivery service. He was classified as a 1099 wage earner, but wasn’t aware that he should have been paying in his quarterly estimated taxes. When he realized his mistake, he was panic stricken and asked for my help. As another tax season approaches, I was thinking about this situation and wondered how many other people might be in this same dilemma.
If you know you are in this position or if you receive a letter from the IRS in December, it is probably going to state that you haven’t paid any estimated quarterly taxes and you are going to be penalized. At this point, you might actually prefer having to deal with Scrooge! While the letter from the IRS might be true, there are a few bits of information that might help you get back into the holiday spirit.
You don’t have to make quarterly payments, unless both of the following statements apply to you:
- You expect to owe at least $1,000 in tax for 2017, after subtracting your withholding and refundable credits.
2. You expect your withholding and refundable credits to be less than the smaller. a. 90% of the tax to be shown on your 2017 tax return, or b. 100% of the tax shown on your 2016 tax return. Your 2016 tax return must cover all 12 months”. (If your adjusted gross income for 2016 is more than $150,000 (married filing joint), the percentage will be 110%).
Now, if both of those statements do apply to you, there is still time to possibly avoid those penalties. You can immediately send in an estimated tax payment with Form 1040-ES, the deadline for the fourth quarter payment is January 16, 2018. A second option is to file your taxes and pay any amount due by January 31, 2018.
The best option is to contact a trusted CPA, let them help you, so that can get back to the festivities!
Categories: Tax Information