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What are estimated taxes


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For some workers, tax season doesn’t end on April 15. In fact, that’s the date when it begins.

Freelancers, contractors, and any professional who doesn’t have taxes withheld from paychecks may be required to make an estimated tax payment at the end of each quarter in Massachusetts. The Department of Revenue (DOR) has guidelines to determine if you are someone who must pay estimated taxes .

Who Must Pay Estimated Taxes?

If you receive more than $400 in taxable income which hasn’t had any taxes withheld from it, you should be paying estimated taxes. While employment is often the main source of earnings for most individuals, there are other forms of income that haven’t had taxes withheld:

  • Gains from the sale of capital assets;
  • Income from a business;
  • Income from an estate or trust;
  • Rental income;
  • Lottery winnings;
  • Unemployment compensation;
  • Dividends and interest income; and
  • Income from some retirement plans.

When to File

You should file estimated taxes in a single payment at the start of the year or in four installments at the end of each quarter. Each payment should total 25 percent of the annual estimated taxes and be paid by the following deadline dates:

  • Installment 1 — April 15, 2015;
  • Installment 2 — June 15, 2015;
  • Installment 3 — Sept. 15, 2015; and
  • Installment 4 — Jan. 15, 2016.

How to File

Submitting installment payments can be done online with DOR’s WebFile for Income tool or by mailing payments and forms to: Massachusetts Department of Revenue, P.O. Box 7007, Boston, MA, 02204.

You may use WebFile for Income to set up automatic estimated tax payments, simplifying the process. However, electronic payment isn’t required, and there are

a few main estimated tax forms for 2015 that should be used to file and calculate estimated tax liability .

Overpayments and Underpayments of Estimated Taxes

If you have overpaid or underpaid your estimated taxes, here are actions you can take to address the issue:

  • In the event of overpayment. you may apply the excess amount as a credit on the following year’s taxes. Estimated tax forms have a section for listing such credits.
    • Refunds are also available in the case of overpayments.
  • Underpayment of estimated taxes may result in penalties, although there are exceptions. For example, you will not be penalized if your tax liability exceeds the previous year’s amount.
    • In such cases, submit Form M-2210 (Underpayment of Massachusetts Estimated Income Tax) with your regular income tax form by April 15 of the following year.
      • Form M-2210A (Annualized Income Installment Worksheet) is a worksheet to help you estimate tax liability in these instances.

Alternative to Estimated Tax Payments

You can request that employers withhold earnings to cover income tax by completing Form M-4 (Massachusetts Employee’s Withholding Exemption Certificate). This ensures that taxes are taken out of each paycheck, eliminating the need to pay estimated taxes.

More Information on Estimated Tax Payments

If you want to learn more about estimated tax payments in Massachusetts, visit the DOR website or call DOR’s customer service call center at (617) 887-6367 or toll-free at (800) 392-6089.

Organizing your financial records and setting payment reminders can help you stay on top of your estimated tax obligations for years to come.

When do you start preparing for tax season? Let us know by commenting below or tweeting @ MassGov .

Category: Taxes

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