Where & When to Make Income Tax Payments
WHERE to Make INCOME TAX Payments:
- IRS as an individual – this is what you pay on your 1040 at the end of each tax year.
- State as an individual – this is what you pay on your state return at the end of each year
- State as a corporation / entity – this is what you pay your state as a corporation (depending on each state)
TO MAKE IRS Income Tax Payments as an individual: click here …usually this is the amount owed on Form 1040 …It will ask you:
- Reason for payment, which is usually: “Tax Return or Notice”
- Apply Payment to, which is usually: 1040 (but could be for a notice or other reason)
- Tax Period, which is: the Year in which income was generated / taxes are owed (or tax year on “notice”)
To make State Income Tax Payments for personal returns to CA (Franchise Tax Board): click here (other states in other article)
- Input your social security number and last name (last reported to FTB).
- Next Screen: Input your full name, address & phone (last reported to FTB).
- Choose Payment Type, which is usually tax return payment, but often is “estimates” for self-employed quarterly payments.
- Input a) Tax Year in which income was generated / taxes are owed (or tax year on “notice”), b) Amount, & c) Date to Pay.
To make State Income Tax Payments for Corporate taxes to CA (Franchise Tax Board): click here
- Choose Entity Type, which is: Corp, LLC or Partnership, and
- INPUT your Corp ID – ONLY 7 NUMBERS. You can look-up your ID by clicking here – remember, INPUT numbers only.
- Input your name and phone (last reported to FTB)
- Choose which Form (Form you file for Corp/LLC/LLP CA return). This is on your corporate tax return.
- Select what the payment is for – usually estimated tax (for beginning of year payments) or Original Return Payment when additional amounts are owed.
WHEN to Make Income Tax Payments:
- IRS Income Taxes as an individual – this is what you pay to IRS (“The Fed”) for income earned each year
- State Income Taxes as an individual – this is what you pay your state for income earned each year
- State as a corporation / entity – this is what you pay your state as a corporation (depending on each state), for the privilege of operating as a corporate entity in that state each year and for income taxes to the degree you earn a profit – this varies widely by state. This article refers to California (FTB) only.
In general, income taxes are due when earned. That’s why employers withhold taxes for employees and self-employed or business owners pay quarterly taxes prior to the time tax filings are due. If you are an employee, your employer is required to “withhold” income taxes on your behalf, essentially so that you won’t have a large amount due at the end of the year that you can’t pay. You complete a Form W4 with each employer which tells the employer your likely/general tax liability and influences how much they take out and send off to the IRS for you each month.
If you are a private contractor or own your own business, you must additionally pay quarterly taxes on any profits not covered by payroll or paychecks you pay to yourself, in order to cover the income taxes likely due by the end of the year for profits over and above money you might pay yourself as an employee of your company through a payroll service. If payroll and/or quarterlies are not paid and taxes are owed at the end of the year, you will pay penalties for with-holdings and quarterlies not paid at the time your income was earned – which is usually the year prior to the time you do your taxes.
Myth “Taxes are due by April 15th.” ….WRONG! Personal tax returns are due by April 15th. Tax payments are due when you earn the money – employees pay monthly, business owners pay quarterly, as earned. However, if you have already paid 100 percent of your prior year’s tax liability or 90 percent of your current year’s tax liability by April 15th of the year after the year the money was earned, there will be no penalty for late payments. But, those amounts owed are exceeded due to lack of withholding or not paying (enough) quarterly taxes (self-employed’s) then you will have penalties which will mount each month you continue “not paying” the amounts owed, starting from the time the income/profits were originally earned.