This past February, Treasury Secretary Steven Mnuchin told the Wall Street Journal that the Trump administration wants to overhaul the tax code before Congress leaves for its August recess. But he acknowledged that passing complex legislation in less than six months was “an ambitious timeline,” and that the administration and Congress might be unable to meet and “it could slip to later this year.”
On March 22, the Journal concluded that Mr. Mnuchin was overly optimistic. “It is looking as if the legislation might not land on President Donald Trump’s desk until early next year.”
Segue to two days later, when the president pulled the plug on repeal of the Affordable Care Act. His self-inflicted debacle will make it even more difficult for him to accomplish the already daunting task of cutting deals with a combative Congress for a top-to-bottom rewrite of the tax laws, a pledge he frequently made during the election campaign and after taking office.
For planning purposes, let’s assume that Voltaire’s Doctor Pangloss was right. Whenever reductions in rates and other tax cuts are enacted, they are going to take effect soon enough for them to retroactively apply to the start of tax year 2017. In that case, estimates of quarterly payments based on 2016 payments may turn out to be too high.
If that happens, noted the New York Times of Feb. 19, “taxpayers will need to recalculate their estimates” subsequently – in April, June, September or even next January, “depending on when a law is enacted – and reduce their payments accordingly.”
Whatever happens, the IRS isn’t going to relax the long-standing rules for estimated payments. As a result, taxpayers who are indifferent to the due dates for payments might incur sizable, nondeductible penalties. What follows is a rundown of the basics.
Who remains in the IRS’s crosshairs? Individuals who receive income from sources not subject to withholding and whose estimated tax exceeds $1,000.The agency requires them to use Form 1040-ES, Estimated Tax for Individuals, to submit their payments of taxes (including any self-employment tax).
The IRS exacts payments mostly from persons in these categories: