I am receiving royalties from natural gas. How do I pay quarterly taxes to avoid penalties? What form should I use, and where do I send the money and estimates as to the percentage I should pay?
Quarterly estimated tax paying is an appropriate practice to perform so that income tax penalties and accumulating tax liabilities don’t get too high beyond reason and your ability to pay. The IRS’s website is a good resource for the questions to which you seek answers.
In a nutshell, you may use several online estimated tax calculators (or the IRS estimating worksheets) to determine your expected tax liability. If your liability is $1,000 or more, then you should divide that amount into quarterly payments (or the remaining quarterly payment deadlines) to pay. You can pay the estimated amounts by mail (using a voucher), by phone, or online. The forms, dates, and addresses to mail the vouchers can be found in the instructions for Form 1040-ES. All of these may be downloaded for your convenience.
Again, I suggest you review the information on the IRS’s website cited above, and talk with your tax professional for more assistance.
For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.
Answered by: Gregory Paulding, CPA, is president of Paulding & Associates PC in Erie, Pa.