Filing & Paying Business Taxes

Income Tax - Continued from last week

You can pay your estimated tax electronically using various options. If you pay electronically, there is no need to mail in Form 1040 payment vouchers. These options include: 1. Paying electronically through the Electronic Federal Tax Payment System (EFTPS). 2. Paying by authorizing an electronic funds withdrawal when you file Form 1040 electronically. 3. Paying by credit card over the phone or by Internet. Other options include crediting an overpayment from your 2006 return to your 2007 estimated tax, and mailing check or money order with a Form 1040-ES payment voucher.

Electronic Federal Tax Payment System (EFTPS) 1. To enroll in EFTPS, go to www.eftps.gov or call 1-800-555-4477. 2. When you request a new EIN and you will have a tax obligation, you are automatically enrolled in EFTPS. 3. Benefits of EFTPS: a. The chance of an error in making your payments is reduced. b. You receive immediate confirmation of every transaction.

Penalty for underpayment of tax. If you did not pay enough income tax and self-employment tax for 2006 by withholding or by making estimated tax payments, you may have to pay a penalty on the amount not paid. The IRS will figure the penalty for you and send you a bill. Or you can use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if you have to pay a penalty and to figure the penalty amount.

Self-Employment (SE) Tax: Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. If you earned income as a statutory employee, you do not pay SE tax on that income.

This column is offered as a public service with the understanding that each person's tax situation is different; and that you should consult your CPA before taking any action based upon comments made in this article. Call me and I will be happy to explain my “CPA Quality Tax Preparation at H&R Block Rates”.  I can be reached at 825-2771.

Continued next week