Time’s Up! First Estimated Tax Payment Is Due Thursday
Time to write that check. First-quarter estimated tax payments for 2021 are due Thursday despite repeated calls for the IRS to extend the deadline to May 17, the new due date for individual taxpayers to file their 2020 federal tax returns.
For the past month, members of Congress and professional tax organizations have lobbied the IRS to postpone the deadline for first-quarter payments, saying the current deadline is unfair to small business owners, freelancers, and contractors. Even as late as Tuesday, IRS Commissioner Charles Rettig was faced with these complaints during a hearing with the Senate Finance Committee, but Rettig defended the deadline, saying the system is fair because everyone must “pay as you go.”
Estimated payments are based on current income, and the self-employed are expected to make payments quarterly on income received that quarter, so the payments due on April 15 are for the tax year 2021, not 2020.
But many small business owners and self-employed workers base their quarterly payments on their tax returns from the previous year, the American Institute of CPAs (AICPA) said. So small business owners cannot take advantage of the extension on 2020’s return because they would not be able to make an accurate estimate for the first quarter of 2021.
Rettig stood his ground. “The taxpayer who gets withholding has withholding out of every check,” he said. “For people who are 1099 and schedule C, the ‘pay as you go’ is you make quarterly payments during the course of the year.” Self-employed workers receive 1099 forms from anyone who has paid them more than $600 in a calendar year, and sole proprietors must report profit or loss from a business on Schedule C.