WASHINGTON — The IRS urges taxpayers to check into their options to avoid being subject to estimated tax penalties, which apply when someone underpays their taxes. Taxpayers who paid too little tax during 2021 can still avoid a surprise tax-time bill and possible penalty by making a quarterly estimated tax payment now, directly to the Internal Revenue Service. The deadline for making a payment for the fourth quarter of 2021 is Tuesday, January 18, 2022.
Income taxes are pay-as-you-go. This means that taxpayers need to pay most of their tax during the year as income is earned or received. There are two ways to do this:
- Withholding from paychecks, pension payments and some government payments, such as Social Security benefits or unemployment compensation. Most people pay their tax this way.
- Making quarterly estimated tax payments throughout the year to the IRS. Self-employed people and investors, among others, often pay tax this way.
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