Question

If a taxpayer has a balance due, the tax preparer may need to determine if estimated payments will be necessary for the next year. If they are necessary, what steps should the tax preparer take?
Calculate the payment amounts and provide federal Form 1040-ES, Estimated Tax for Individuals, and the state equivalent, for the taxpayer.
Have the taxpayer file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, and pay any balances six months later.
File Form 1040-X, Amended U.S. Individual Income Tax Return, for the taxpayer.
File Form 9465, Installment Agreement Request, for the taxpayer.

Answer 1

Correct action: Calculate the payment amounts and provide federal Form 1040‑ES (and the state equivalent) for the taxpayer.

Why:
- If a taxpayer will owe tax during the next year, the preparer should estimate the taxpayer’s tax liability and compute the quarterly estimated payments (with vouchers or electronic payment instructions) so the taxpayer can avoid penalties.
- Form 4868 only extends the time to file, not the time to pay — it does not eliminate the need to make estimated payments by their quarterly due dates.
- Form 1040‑X is for amending a filed return and is not used to set up estimated payments.
- Form 9465 is an installment agreement request to pay an existing balance over time; it’s an option if the taxpayer cannot pay a current balance due, but it does not replace the need to set up estimated payments for the following year.

Practical notes you can offer the taxpayer:
- Provide the 1040‑ES vouchers and the state estimated‑tax form (or electronic payment instructions).
- Explain quarterly due dates (April, June, September, and January of the following year) and safe‑harbor rules (e.g., pay 90% of current year tax or 100%/110% of prior year depending on AGI) to avoid underpayment penalties.
- If they cannot pay a current balance, discuss options such as an IRS installment agreement (Form 9465) or requesting a short‑term payment plan.