Sunday, March 9, 2008

Tax Withholding : IRS

Federal Income tax is a pay as you go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go:


Estimated Tax

In essence, withholding is where your employer withholds income tax from your pay. In addition, tax may be held from certain other income, including pensions,bonus's commissions and gambling earnings. This amount withheld is paid to the IRS.

In regards to estimated tax, of you do not pay your tax through withholding, or do not pay enough tax that you may have to pay estimated tax quarterly to the government.Those in business, will h ave to pay a portion of their income (according to the proposed time) during the following months: Mar, June, September and December. This amount is in proportionate to your AGI (Adjusted Gross Income) from the previous year. In addition to business estimated tax, one may have to pay quarterly if they receive a certain amount in dividends, interest, capitol gains, rents , royalties , and gambling earnings.

If you have tax debt as a result of not enough withholdings or estimated tax payments that you are regularly paying, contact Effectur where a licensed tax preparer can better explain the deficiency on your returns.

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