Why It Is Necessary to Pay Tax Before Filing Income Tax Returns: A Legal Necessity and Best Practice
In the United States, tax payment is not just a suggestion but a legal requirement. This article explores the importance of paying taxes in a timely manner and the consequences of neglecting this fundamental duty. We will also discuss the legality and benefits of paying taxes before filing your income tax returns.Legal Requirements for Tax Payment
In the US, you are legally required to pay taxes as you earn them. This can be accomplished through withholding by your employer or by making estimated quarterly payments. Both methods help in ensuring that the appropriate amount of tax is collected throughout the year, rather than at the end of the tax season.It is important to understand that if less than 90% of your tax liability is paid by the tax filing deadline, you may be subject to underpayment penalties. These penalties are designed to discourage procrastination and ensure that the IRS has the necessary funds to process your returns and disburse refunds.
The Importance of Regular Tax Payments
Payroll withholding is one of the most common ways individuals comply with this legal requirement. Your employer withholds a portion of your wages to pay towards taxes. This helps in reducing the amount of taxes that might be due at the end of the year, and it also helps in avoiding the surprise of owing a large sum when you file your tax returns.However, many nontechnical methods of tax payment can lead to surprises. For instance, if you only file your tax forms after earning the money and then pay what you owe, you might be in for a shock when you see how much you actually owe. This can lead to penalties and fines that can substantially increase your ultimate tax liability.
Why Paying Estimated Quarterly Taxes is Wise
For self-employed individuals or those with irregular income, estimated quarterly tax payments are an essential practice. These payments help in ensuring that the appropriate amount of tax is being paid throughout the year, thereby minimizing the risk of owing a large sum at the end of the tax year.To determine the amount of estimated tax you should pay, consider your projected annual income. You can break down your income and estimate your tax liability accordingly. This helps in avoiding the significant penalties and interest that may accrue if the IRS determines that you have underestimated your liability.
Best Practices and Legal Precautions
While it is important to stay on top of your tax payments, it is equally crucial to follow the proper procedures. Paying zero salary taxes before the end of the year and then paying it all at the final filing is generally not a good idea. The IRS is adept at identifying such tactics and imposing penalties accordingly.It’s important to remember that just like any other governmental body, the IRS has seen it all. They are highly sophisticated and will scrutinize any attempt to underpay taxes through the year. The best approach is to make consistent and accurate tax payments throughout the year to avoid any legal complications and potential penalties.
Conclusion
In summary, paying taxes in a timely and consistent manner is a legal requirement and a smart financial move. Whether through witholding or estimated quarterly payments, staying ahead of your tax obligations can save you time, stress, and potential fines. Always seek professional advice if you are unsure about your tax obligations to ensure compliance and avoid any legal issues.Remember, paying taxes on time is not just about avoiding penalties but also about living up to your legal responsibility and contributing to the funding of essential public services. By paying taxes before you file, you ensure that you are both compliant and financially prepared for the upcoming tax season.