All posts by taxadvisor

Estimated Taxes

You must pay taxes as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive other income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.If you are in business for yourself, you generally need to make estimated tax payments.

If you don’t pay enough tax, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

Note: Estimated tax requirements are different for farmers and fishermen. You can find info in Publication 505 Tax Withholding and Estimated Tax for more information about these special estimated tax rules.

Individuals who expect to owe tax of $1,000 or more when their return is filed usually have to make estimated tax payments. This includes sole proprietors, partners, and S corporation shareholders.

In addition corporations usually have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.

You may have to pay estimated tax for the current year if your tax was more than zero in the prior year. Forms 1040-ES, Estimated Tax for Individuals (PDF), and Form 1120-W Estimated Tax for Corporations (PDF), list details on who must pay estimated tax.

If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. Simply file a new Form W-4 with your employer and indicate the additional amount you want your employer to withhold.

You do not have to pay estimated tax for the current year if you meet all three of the following conditions.

1. You were a U.S. citizen or resident for the whole year.

2. You had no tax liability for the prior year. (You had no tax liability for the prior year if your total tax was zero or you didn’t have to file an income tax return.)

3. Your prior tax year covered a 12-month period.

Individuals, including sole proprietors, partners, and S corporation shareholders, generally use Form 1040-ES (PDF), to figure estimated tax.

To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.

When figuring your estimated tax for the current year, it may be helpful to refer to your income, deductions, and credits for the prior year as a starting point. You need to estimate the amount of income you expect to earn for the year. If you estimated your earnings too high, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter. You want to estimate your income as accurately as you can to avoid penalties.

Refer to Publication 505, Tax Withholding and Estimated Tax for additional information on how to figure your estimated tax.

Corporations may use Form 1120-W (PDF), to figure estimated tax.

For estimated tax purposes, the year is divided into four payment periods-quarterly taxes, with each period having a payment due date. If you pay enough tax by the due date of each of the payment periods, You may be charged a penalty even if you’re due a refund when you file your income tax return if you do not pay enough tax by the due date.

You may pay your estimated taxes weekly, bi-weekly, monthly, as long as you’ve paid enough in by the end of the quarter. Using the Electronic Federal Tax Payment System (EFTPS), you can access a history of your payments, so you know how much and when you made your estimated tax payments.

Corporations must deposit the payment using the Electronic Federal Tax Payment System (EFTPS). For additional information, refer to Publication 542, Corporations.

If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. Again, there are special rules for farmers and fishermen.

If your income is received unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments.

The penalty may also be waived if the failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or you retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.

Mistake on your tax return? Here is the solution: Amended Returns

If you discover an error after you have filed your return, you may need to correct or amend your tax return. The IRS may correct errors involving mathematical or clerical errors on a return and may accept returns without certain required forms or schedules in which case you do not need in that case to correct/amend your return. However, do file an amended return if there’s a change in your filing status, income, deductions, or credits. Use Form 1040X(pdf) , Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040 (pdf), Form 1040A(pdf), Form 1040EZ(pdf), Form 1040NR (pdf), Form 1040 NR-EZ (pdf), or to change amounts previously adjusted by the IRS. In addition you can also use Form 1040X to make a claim for a carryback due to a loss or unused credit; however, you may also be able to use Form 1045 (pdf), Application for Tentative Refund, instead of Form 1040X. Also, if the Form 8938 (pdf), Statement of Specified Foreign Financial Assets, applies to you, file it with an annual return or an amended return. See the Form 8938 instructions for more information.

If you owe additional tax for a tax year for which the due date for filing hasn’t passed, you can avoid penalties and interest if you file Form 1040X and pay the tax by the due date for that year (without regard to any extension of time to file). If the due date falls on a Saturday, Sunday, or legal holiday, filing the form and paying the tax is timely if filed or paid the next business day. If you file after the unextended due date, don’t include any interest or penalties on Form 1040X; they will be adjusted accordingly.

In many cases, to claim a refund, you must file Form 1040X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, (whichever is later). Returns filed before the due date (without regard to extensions) are considered filed on the due date. Be aware special rules apply for refund claims relating to net operating losses, foreign tax credits, bad debts, and other issues. You can find more information about amending a return by referring to the Form 1040X Instructions, and What If I Made a Mistake? in Chapter 1 of Publication 17, Your Federal Income Tax for Individuals. But note: You cannot file an amended tax return electronically using the e file system. See Where To File in the Form 1040X Instructions for the address to mail your amended return.

File a separate Form 1040X for each tax year you’re amending. Mail each form in a separate envelope. Be sure to enter the year of the return you’re amending at the top of Form 1040X. The form has three columns:

Column A shows original figures (the original return) or adjusted figures.

Column B is the difference between Columns A and C. (There’s an area on the back of the form to explain the specific changes you’re making and the reason for each change.)

Column C shows the corrected figures.

Be sure to attach copies of any forms or schedules affected by the change. Note: be certain to include any Form/s W-2 received after the original filing. You should also attach Form/s W-2G and 1099 that support changes made on the return if there was income tax withheld.

You can check the status of your Form 1040X(pdf) using WMAR (Where’s My Amended Return?) an online tool, or by using the following toll-free telephone number 866-464-2050 three weeks after you file your amended return. These tools are available in English and Spanish. Note: You can track the status of amended returns for the current year and up to three prior years.

You will be required to enter your TIN (taxpayer identification number), which is usually your social security number, date of birth, and ZIP code in either tool to prove your identity. Once you have entered your information the web tool will show the status of your amended return within the processing stages: Received, Adjusted, or Completed. Please note: amended returns take up to 16 weeks to process and up to three weeks from the date of mailing to show up in the system. Unless specifically indicated there is no need to call.

Note: Changes made on your federal return may affect your state tax liability. For information on how to correct your state tax return, contact your state tax agency.

Can I deduct my moving expenses on my taxes

I moved recently can I get a tax deduction for moving expenses?

To write off your moving costs, you must pass three requirements:

Your move must be job related.

Timing of the move.

And distance.


It does not matter if you are moving for the first the job you have had, your current job or a new job.


Timing has two requirements:

Part 1: Moving expenses must be incurred within one year of starting at a new workplace to be deductible.

Part 2: You must work full time at the new location for at least 39 weeks during your first 12 months there. The weeks worked don’t have to be consecutive or with the same employer.

Note* Expenses are deductible even if you have not yet met the timing requirement by the time your tax return is due.

Self-employed workers moving to a new location must meet the year-to-move deadline and work full time at their entrepreneurial enterprise for 78 weeks during the first 24 months. The weeks worked do not have to be consecutive.


The location of your new job must be at least 50 miles further away from your previous residence than your last place of employment was. In other words if you lived 10 miles from your old job, your new job must be at least 60 miles from your old home before you are able deduct moving costs.

The IRS requirements figure the distance using the shortest of commonly traveled routes. Be careful when choosing your route.

If you meet the timing and distance requirements, be sure you save those moving receipts!

IRS approved deductions for this are many and include: your costs to move household goods, personal property, limited storage and associated insurance fees. In addition utility connection/disconnection charges may be eligible too.

Lodging and travel expenses near your new and former homes also are deductible..again these are limited so be sure you know the rules, as well as shipping costs for your automobile. If you drove your vehicle yourself, the mileage rate for using your car to move in 2016 was 19 cents per mile. Be aware that in 2017, the rate will drop to 17 cents a mile.

In addition you can also write off travel arrangements you make moving your household pets to your new home, check the rules.

In conclusion

Be aware that if your new employer reimburses you for some or all of your moving costs, the IRS will not allow you to claim same deductions as moving expenses paid by your boss are not deductible.

If you are married and file jointly, only one spouse needs to meet the time and distance requirements. But, the weeks your spouse worked with the weeks you worked to satisfy the time-employed requirement cannot be combined.

If you want to deduct moving expenses but do not pass the timing requirement all is not lost, you then must file an amended tax return or include the moving expenses in your income the next year. Still have questions on allowable tax deductions regarding moving expenses? Simply refer to IRS Publication 521, Moving Expenses.

Filing Past Due Tax Returns

Regardless of whether or not you can pay in full it is never too late to file tax returns that are due….or in this case overdue. File your past due return in the  same way you would file an on-time return.

Filing your past due taxes and paying now can limit interest and penalties. And there is another big benefit to filing past due taxes-your refund. If you are due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date. The same rule applies to a right to claim tax credits such as for example the Earned Income Credit.

The IRS holds income tax refunds in cases where records show that one or more income tax returns are past due, and will hold them until they get the past due return or receive an acceptable reason for not filing the past due return or returns.

Another benefit to filing past due returns is that if you are self-employed and do not file your federal income tax return, any self-employment income you earned will not be reported to the Social Security Administration and you will not receive your credits toward Social Security retirement or disability benefits.

Avoid Issues Regarding Loans and Credit

If you don’t file your return it can affect your credit and loan approvals may be delayed or denied. Copies of filed tax returns may be requested by financial institutions, mortgage lenders/brokers, etc., when you apply to buy or refinance a home, get a business loan, or even apply for federal aid for higher education.

It is always wise to file your taxes on time for many reasons, and the IRS does offer an installment plan to help you be able to pay any taxes due. And be aware that if you do not file on your own, the IRS may file a substitute return for you, which might not credit you for deductions and exemptions you may be entitled to.

So, if you have for whatever reason not filed on time then do it now….as the old saying goes, ‘Better late than never’.