As a freelancer, I have to do a lot of preparation for my taxes, like saving a certain percentage of money from each paycheck throughout the year and making estimated quarterly payments. Like most people, I don't love thinking about taxes, but I know ignoring them isn't the answer, either. "People are always slightly nervous around tax season," said Jeffrey S. Levine, a certified public accountant (CPA) with Alkon & Levine, PC. "Will they have all the data needed to prepare their return? Will they owe money? Will they be victims of the numerous ID theft issues of recent past?"
Of course, the confusing tax code doesn't help, either. "For most people, you open up a 1040 Form and start reading the questions and you think, 'No mortal can do this,'" said Aaron Schwartz, a CPA with Nussbaum Yates Berg Klein & Wolpow, LLP. Whether you work with a CPA or file your own taxes, knowledge is key. To better prep for the 2019 tax season—and to avoid the penalties that come with making late payments—keep the following information handy and you won't have to ask, "When are taxes due?"
January 15, 2019
Fourth Quarter 2018 Estimated Tax Payments
To understand estimated quarterly taxes, Levine says to think of taxes as being due on a pay-as-you-go basis. "Employees have taxes withheld from their payroll, but self-employed people, or people living on investment income, don't have withholdings," he said. "So they need to pay estimated taxes quarterly."
Every three months, self-employed people who expect to earn more than $1,000 in a year need to estimate their tax liability for the quarter and submit a payment. In most cases, this means paying both federal and state tax. "Most states that have a filing deadline work closely with the federal tax law and follow similar deadlines," said Levine. "Of course, some rules are different, and tax law between states can be different, but the concept and filing process is similar." Check with a certified accountant if you aren't sure when state taxes are due for your state.
"You need to make payments in order to avoid the underestimated tax penalty," said Jeffrey A. Schneider, a certified tax resolutions specialist and advanced crypto tax expert with SFS Tax & Accounting Services. "You can avoid this penalty if your total payment made to the IRS—including estimates, withholding and the prior year's overpayment carried to the current year—is equal to 100% of the prior year's tax, or 90% of the current year's as computed when you prepare the return."
Too often, people bank the full amount of their income and end up spending it, Schwartz said. "And when it comes time to pay their estimated or year-end tax bill, they do not have sufficient funds." To estimate your own quarterly returns, Schneider recommends making at least the same payment as your return from last year, or if it's your first time making these types of payments, you may want to consult a tax professional for help on the best payments to make. "Remember, that is just to avoid the penalty," he said. "If your income goes up in the current year, you will be short. The taxpayer must make sure the balance is paid with the return or an extension."
In other words, if your income went up in 2018 and you feel you're short on payments, you can always make up the difference in your fourth quarter payment—or you have until you file your actual return on April 15 to avoid paying the ongoing late penalty of 5% per month. "If you pay after this date, even if your return is extended, you will pay that penalty, plus interest on the taxes owed," said Schneider. "Remember, an extension is an extension to file, not to pay."
January 31, 2019
2018 employee filing deadline
If you have employees, the deadline to file their W-2s or 1099s is Jan. 31.
March 15, 2019
LLC and S-corporation tax returns due for tax year 2019
If you're an LLC or S-corporation owner, be prepared to file your taxes by this date. "The reason they are due earlier is because these entities issue K-1s to their respective owners and members, and this information needs to be included on the individual tax return [in April]," said Josh Zimmelman, owner of Westwood Tax & Consulting.
To file, S-corporation and LLC owners need to include their income and expenses on their return. "Businesses with income over $250,000 or assets over $1 million will also need to include a balance sheet, which details business assets and liabilities," Zimmelman added.
April 15, 2019
Individual tax returns or extensions due for tax year 2019
April 15 is the day most people think of when they think about tax time. It's the single due date for most regular tax filers—that is, people who aren't self-employed or business owners. The most important reason to file your taxes on time is because it's the law, said Levine. Besides that, people who are late in filing their taxes will be penalized unless they apply for an extension. Remember, "the extension is not added time to pay," said Levine. "You must pay your best guess of tax due by April 15 or else you will be charged late fees and interest."
Filing for a tax extension is easy—just fill out and submit Form 4868 either online or through the mail, and pay your estimated taxes. "This gives the taxpayer six months to file, or until Oct. 15," said Schneider. "If you do not file the extension or file the return by the extended due date, you will be subject to the late filing penalty of 5% per month." And partial months count as full months, said Schneider—if the due date is April 15 and you file by April 20, you'll be charged for a full month, even though you were only five days late.
Many people end up filing for a tax extension simply because they haven't received all the forms they need by the due date. Common paperwork you'll need to prepare your return include:
- You'll receive income paperwork in the mail, including W-2 forms and 1099 forms (1099-Int, 1099-Div, 1099-R, 1099-Misc, 1099-B) for investments, pension or IRA distributions or self-employment work.
- You might also receive Form 1099-Q for withdrawals from a college savings plan.
- You'll have deduction paperwork from your own records, including invoices, canceled checks, medical bills and charity acknowledgement letters.
- You may get a Form 1098 for mortgage interest and real estate taxes through your bank or mortgage company, a Form 1098-E for student loan interest or Form 1098-T for tuition paid to a college.
- Self-employed people need records of their income and invoices and canceled checks for business expenses, or credit card receipts for expenses paid by credit card.
"Many people ask me if they have to report monies received in cash, or for which they do not get a 1099," said Schneider. "The obvious answer is 'yes.' A form is not the requirement to file. The receipt of the income is."
If you fail to file for a tax extension, the IRS is likely to send letters and warnings, but there is also the chance that after doing so, they may file for you. "They may complete a 'Substitute for Return,' which will not include any federal exemptions, expenses or credits," said Zimmelman. "This could lead to a bigger tax bill than if you filed yourself, and failure to pay it could result in a level on your wages or bank account. However, if you are due a tax refund, generally there are no negative consequences for filing your return late."
Keep in mind that filing on time is also a good way to close out the year, said Levine, and "it also provides a great jumping-off point for the new year. Rather than dealing with old info months down the road, you are done, filed and can move on to the current year."
First quarterly payments due for 2019
For people making quarterly estimated tax payments, the first payment for 2019 is due April 15. As with payments for the fourth quarter, people making their first quarterly payment for 2019 can either base their payment on their prior year's income or use their best guess based on what they've earned during the first three months of the current year.
Remember, "the types of people who owe [quarterly tax payments] in April are either self-employed, own parts of investment property like rental properties or investment partnerships, or people who had large capital gains in 2018 and expect similar in 2019," Levine said.
Last day to make a 2018 IRA contribution
Individual retirement accounts (IRAs) and certain other retirement savings plans—like a SEP-IRA, SIMPLE IRA, or solo self-employed 401(k) or profit-sharing plan—allow you to contribute a deductible (or nondeductible) amount through April 15 of the year following your tax year. "Usually you can't deduct an expense paid in 2019 on your 2018 return," said Levine, "but you can for these types of retirement plans. It is an exception to the law requiring all payments to be done in the same tax year."
How much you can contribute to your IRA is based on your adjusted gross income (AGI), but the common figure for most people is $5,500 with a catch-up amount of an additional $1,000 if you're 50 or over. "It is important to consider always maxing out your allowed contribution, as it helps you plan for retirement, and any year you miss can't be brought back," Levine added. "In other words, once you miss the deadline, you can't make it up."
For people with SEP-IRAs, the contributions that a business or self-employed business make to each employee's account each year can't exceed the lesser of 25% of compensation or $55,000 for 2018. Also, while there are no extensions available for contributing to an IRA past this date, a business can contribute to a SEP or SIMPLE IRA by the original or extended due date of the return, said Schneider.
May 15, 2019
Tax returns or extensions due for tax year 2019 for tax-exempt organizations
Nonprofits and charities that are tax-exempt have until May 15, 2019, to file their tax returns or request an extension. "Of course, those dates assume that your organization's tax year ends on Dec. 31," Zimmelman said. "If you have a different ending date, your return due dates are different. For example, your returns would be due on Feb. 15, 2019, if your tax year ended on Oct. 31."
June 15, 2019
Second quarter 2019 estimated tax payment due
As with the fourth and first estimated payments, self-employed people withholding their own taxes will owe their second round of quarterly payments for 2019 on June 15, 2019.
September 15, 2019
Third quarter 2019 estimated tax payment due
Although the drill here is the same as first and second quarterly payments, Levine recommends using the first two payments as a more accurate indicator of yearly income. That way, "as you get closer to year-end, you may have a better idea of your income so you might be able to project your tax and adjust your estimated tax payments," he suggests.
October 15, 2019
Extended individual tax returns due
People who filed for extensions back in April will now owe their tax returns. However, "if you did extend your return due date from April to October, don't wait until October to file," said Levine. "Get your records out, figure out the tax and get it done. Why wait? If you're missing information, get it done once you get what is needed. Remember, you have already paid the tax in order to qualify for the extension, so the pain is over—you have to file to close out the year."
January 15, 2020
Fourth quarter 2019 estimated tax payment due
Final estimates on your 2019 income will be due Jan. 15, 2020, for freelancers and other self-employed people. "Again, the last quarter is a good time to really estimate your tax and get a better grasp of what records you will need for April," said Levine. "What expenses can you categorize now to avoid an April extension? Determine whether you can adjust your last estimated tax payments."
The fourth quarter is also a great time to see what you might be able to do to lower your tax bill in general, said Levine, like spending more money on your business, setting up a pension plan, selling (or harvesting) losses in your investment account or making more charitable contributions—in other words, "whatever you can do to lower the tax bite."