This year has been an all-around bizarre year. Contributing to the craziness from a financial planning standpoint was the delayed tax-filing deadline. Normally April 15, the deadline for 2019 tax returns was pushed back to July 15. Extensions for 2019 tax returns are due October 15 as usual.
If you’re self-employed or don’t have taxes withheld from other sources of taxable income, it’s up to you to periodically pay the IRS by making estimated tax payments. Estimated taxes are typically paid in four equal installments – one installment for each quarter of the year.
The first quarter estimated tax payment for 2020 was originally due April 15, 2020, and the second quarter payment was originally due June 15, 2020. However, for this year, payments for the first and second quarter weren’t due until July 15, 2020. As a result, the 2020 estimated tax payment schedule was adjusted as follows:
Due Dates for 2020 Estimated Tax Payments
|Payment||When Income Earned in 2020||Due Date|
|1st Payment||January 1 to March 31||July 15, 2020|
|2nd Payment||April 1 to May 31||July 15, 2020|
|3rd Payment||June 1 to August 31||September 15, 2020|
|4th Payment||September 1 to December 31||January 15, 2020|
You don’t have to make estimated tax payments until you have income on which you will owe tax. So, for example, if you didn’t have any taxable income until July 2020, you don’t have to make an estimated tax payment until September 15, 2020. At that point, you can either pay your entire estimated tax by September 15, or you can pay it in two installments by September 15 and January 15.
You don’t have to make the payment due January 15, 2021, if you file your 2020 tax return by February 1, 2021, and pay the entire balance due with your return.
A note from the IRS regarding farmers and fishermen: If at least two-thirds of your gross income is from farming or fishing, you can make just one estimated tax payment for the 2020 tax year by January 15, 2021. If you file your 2020 tax return by March 1, 2021, and pay all the tax you owe at that time, you don’t need to make any estimated tax payments.
The calculation and payment of estimated taxes is done using IRS Form 1040-ES. Please reach out to your CPA or tax professional with any questions. There are no silly questions – especially in this silly year!