Wednesday, May 12, 2021
HomeFinanceGet ready to pay up if you owe quarterly taxes

Get ready to pay up if you owe quarterly taxes


While the IRS extended this year’s federal individual income tax filing deadline by a month amid the ongoing struggles people are facing due to the pandemic, millions of people will still have to pay their estimated quarterly income taxes next week, leaving some scrambling to gather information in time for the looming deadline and others confused.

Last month, the IRS and Treasury Department announced they were postponing the deadline for individuals who file tax returns to May 17. However, estimated tax payments covering January, February and March for individuals who pay quarterly are due on Thursday, April 15, as required by law.  

“Those people are people who have small businesses who need to make payments. It is also those people who are self-employed who need to make payments,” said Melanie Lauritsen from the American Institute of Certified Public Accountants. “With the gig economy people, there are a lot of people new entering into this world of employment, and they might not be aware that they have to make quarterly payments, and so it’s these people that I’m most concerned about. They may be thinking ‘Oh, my tax return got postponed.’ But in reality for them, not really.”

If the IRS does not receive the estimated quarterly payments on time, struggling taxpayers could face penalties in the form of interest on top of the taxes they owe. 

Adding to potential confusion, last year, when the pandemic struck, the federal income tax filing deadline and the first estimated quarterly payment deadline were both pushed back to the same date in July. That is not the case this year. The IRS is now working to remind taxpayers what’s due when with the two separate deadlines. 

This comes as lawmakers have called for all deadlines to fall on the same, postponed date. Representative Lloyd Smucker introduced legislation Thursday to extend the deadline for small businesses that file quarterly estimated payments to May 17 to align with the individual filing deadline. 

“It is disappointing that the IRS is failing to provide our nation’s small businesses, many of whom are still recovering from the COVID-19 pandemic, with this commonsense flexibility of an aligned deadline for the filing of individual taxes and the first quarter payment deadline,” said the Pennsylvania Republican in a statement. “This decision will create completely unnecessary headaches for many small businesses.”

IRS Commissioner Charles Rettig testified last month that the individual filing deadline extension was an accommodation for the most vulnerable individuals. He clarified then it does not apply to first quarter estimated payments. 

“There’s a large contingent of wealthy individuals in this country who do not make their estimated payments, and who essentially take the money that they should be paying in in estimated payments on a quarterly basis to the government and take the arbitrage and they invest it,” he said, explaining why the quarterly deadline was not extended. “And we’re not going to give them a break of interest in penalties to do so.”

But that explanation did not satisfy lawmakers. Smucker led a bipartisan group of 60 lawmakers last week in sending Rettig a letter requesting the deadline be extended on estimated quarterly payments.  

“Contrary to your claim, we have heard from numerous struggling small businesses in our Congressional Districts that do not follow this practice and will not be able to file on time,” the letter read. “Many small- and medium-sized businesses pay their quarterly estimated taxes based on their returns from the previous year. If these businesses do not file until May 17, 2021, they will not know what their estimated payment liability will be for this filing year.”

The letter called paying a penalty in interest as the only option for these businesses “unacceptable.” 

Rettig is scheduled to testify Tuesday before the Senate Finance Committee on the 2021 filing season where he will likely face more questions about the looming deadline.

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