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San Jose, CA quarterly tax payment attorneyIf you have to pay estimated quarterly taxes, it is critical to pay the correct amount. Underpaying can result in a penalty, and overpaying gives what is essentially an interest-free loan to the government that cannot be recouped until a return is filed.

This is especially true in light of the Tax Cuts and Jobs Act of 2017, which substantially changed income taxes. The law altered the tax brackets and tax rates for individual or married taxpayers, made changes to the allowable deductions for business expenses, increased the standard deduction and child tax credit, took away personal exemptions, and limited or ended other deductions. Because of this, many taxpayers will need to adjust the amount of the taxes they remit each quarter via estimated tax payments. 

Who Must Pay Estimated Quarterly Taxes?

Typically, taxpayers have to make estimated tax payments if they expect to owe tax of $1,000 or more when their returns are filed. One common category of taxpayers who should pay estimated quarterly taxes are people who are self-employed. In addition, investors and retirees often need to make these payments because they have a substantial portion of income that is not subject to withholding. Other income that is typically not subject to tax withholding includes interest, capital gains, stock dividends, alimony or spousal support, and income from rental property.

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San Jose tax attorney, estimated taxesIf you are an independent contractor, you may be required to pay your taxes several times throughout the year. This is called an estimated tax.

This requirement comes as a surprise to many freelancers and contract employees. If not properly handled, it can create undue stress as well as expose the taxpayer to IRS penalties.

It is important to not get bogged down in the complexity of your tax situation as an independent contractor. Instead, you should reach out to a professional, such as a tax attorney, who can advise you on how you need to comply.

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