What Are Estimated Tax Payments?

Serving Jackson, Mississippi, residents since 2015, Sunbelt Tax Service offers comprehensive tax preparation services at reasonable, fixed-price rates. Sunbelt Tax Service specializes in all types of filing situations, including annual and quarterly tax returns.

One of the major differences between employees and independent contractors is how they are taxed. Employees’ taxes are withheld from their paychecks. Independent contractors, on the other hand, must withhold their own taxes. For this reason, the IRS requires recipients of 1099s worth more than $400 to pay estimated taxes every quarter.

Estimated tax payments include a 15.3 percent self-employment tax and regular income tax. For most independent contractors, between 30 to 35 percent of gross income should be allocated to quarterly tax payments. When the contractor files an annual tax return, the IRS will apply previously paid taxes to the final tax bill. Any overpayments will be refunded. If taxes are owed, there will be no penalties if the estimated payments equate to at least 90 percent of taxes owed the previous year.

 

Differences Between Tax Credits and Deductibles

Sunbelt Tax Service processes thousands of individual and business tax returns every tax season. One of the leading tax preparation firms in Jackson, Mississippi, Sunbelt Tax Service's consultants are dedicated to identifying every applicable deduction and credit to secure the highest possible refund and lowest tax liabilities for their clients.

To incentivize certain actions, the IRS provides individuals and businesses with credits and deductions to lower their tax bills. Credits lower the amount of tax due, while deductions lower the amount of income liable for taxes. In general, credits have a larger impact on the final tax bill. However, some credits will only reduce the amount of tax owed to zero rather than resulting in a refund. Two exceptions are the Child Tax Credit and Earned Income Tax Credit.

Since these are refundable, even people who owed little or no tax may receive a refund after these credits are applied. Deductions on the other hand are offered in two forms, standard and itemized. The standard deduction increases every year, with the highest deduction for couples filing jointly. Itemized deductions include expenses such as mortgage interest, medical bills, or donations. For some filers, itemized deductions will result in more tax savings than the standardized option.

Who is Responsible for Paying the Estate Taxes?

Owned by experienced tax specialist Casey Earnest, Sunbelt Tax Services is a tax preparation firm based in Jackson, Mississippi. Sunbelt Tax Services is manned by expert tax preparers who are well-versed in business and personal tax returns.

One example of a personal tax is the estate tax. The estate tax is imposed on a deceased person’s assets valued at the time of his or her death. It becomes due for payment nine months after the death of the person.

Normally, the deceased person’s will specifies who will pay for the estate tax, which generally falls under the responsibility of the executor. In this case, the executor uses the probate assets to pay off the estate tax.

However, a problem arises when some of the assets pass out of the will, such as in the case of joint ownership or beneficiary designations. When any of these cases arise, the probate assets may not be enough to pay off the estate tax, which means that some beneficiaries will end up paying a disproportionate share of the estate tax.

Additionally, some non-probate assets, like IRA’s, 401K’s, and life insurance policies, are directly paid to the beneficiaries. Since these assets are non-probate, the beneficiaries need not contribute to the payment of estate tax although such assets are included in the total taxable assets and are included in the computation of the estate tax.

A person should be very diligent in naming the beneficiaries of his or her assets in the will to avoid future problems among the beneficiaries when it comes to paying the estate tax. A comprehensive discussion with the attorney may be necessary for the preparation of the will.