Tax Payment: Figuring Out How Much To Pay

The United States operates on a pay as you go tax payment system. This means you must make regular contributions to the taxes you will owe each quarter or paycheck. If you do not, you will be penalized. Unfortunately, it can be difficult to determine how much you will need to pay during the course of the year and how much you may still owe at the end of the year. Thankfully, the IRS has taken huge steps to make it easier to calculate these payments. You can get help on the back of most tax forms, online or by contacting an IRS service office.

Following Instructions Using a W-2

The best way to determine the amount of taxes you owe is to follow instructions on the tax form you are filing. If you are filling out a W-2, you are providing a document for your employer to determine your taxes for you. This form is then sent to you at the end of the year, and you can adjust it with any further deductions required. These deductions may include vehicle expenses, charitable contributions and contributions to a retirement plan. These can be reported using a Schedule C or Form 1040. Simply read the instructions on the back of your tax forms in order to fill in the blanks.

Following Instructions on a 1099 or Self-Employed Form

If you do not have an employer, you will have more complications in determining your taxable income. You will have to calculate this yourself. Start with a Schedule C for reporting income. You will need to include all income you received, including tips or cash payments, in order to legally file. Make sure to claim all deductions available to you. For help, consider consulting an accountant the first year you file. In the future, you will have an easier time tracking your deductions based on the accountant's advice in the first year. Remember to make estimated quarterly tax payments as you go; simply use the tax bracket you fell into in the previous year as a guideline for your estimates.

Getting Help Online

If you are uncertain of how to fill out a form, consider using the IRS.gov website for assistance. Here, a database of all tax forms is accessible. On the back of the form you are filling out, you will find instructions for supplemental literature. For example, there is a piece called "IRA and Roth IRA Income Reporting." Simply look for the literature you need through the IRS website. 

Contacting the IRS for Help

The IRS can provide tax advice directly to you. This advice will not assist you in lowering your taxes, but it will assist you in assuring you are filling out forms correctly and meeting all deadlines. Local IRS service centers can respond in writing to any request you provide. Save all information the IRS provides you. If there is any mistake, you will be exempt from penalty if you were following advice you received directly from the IRS. Be sure to save written copies and not just records of your conversation.

blog comments powered by Disqus