Estimated Tax Payments | FAQ
In the United States, taxes are pay-as-you-go, which means that you need to pay your taxes throughout the year as you receive income. If you’re employed, then your employer takes taxes out of your paycheck, based on your W-4 withholding certificate, to fulfill your tax payments. If you earn income outside of a salary, such as from self-employment, interest, dividends, capital gains, rentals, or alimony, then you are responsible for remitting tax from this income to the IRS.
To pay taxes on income outside of your salary, you can file a new Form W-4 with your employer to withhold more from your paycheck and adjust for your other income or make estimated tax payments.
What Are Estimated Tax Payments?
Estimated tax payments refer to tax payments made to the IRS when withholding on a paycheck isn’t enough or if an individual has taxable income outside of a salary. These payments can be used to cover income tax, self-employment tax, and alternative minimum tax.
Who Needs to Make Estimated Tax Payments?
You may need to make estimated tax payments if:
You expect to owe $1,000 or more in unpaid tax when you file your tax return; or
Your federal income tax withholding is less than 90% of the total tax you expect to owe for the tax year; or
Your federal income tax withholding is less than 100% of the total tax owed on the prior year’s tax return.
How Much Are Estimated Tax Payments?
IRS Form 1040-ES provides a worksheet for figuring out the amount of your estimated tax payments, which depends on your income and eligibility for deductions and credits. You can use your prior year tax return as a starting point and adjust as necessary. It’s important to estimate your income as accurately as possible to avoid underpayment penalties.
Typically, individuals make four equal estimated tax payments, but if you have uneven income throughout the year, for example, due to seasonal work, you may choose to make unequal payments. There are special rules for farmers, fishermen, and certain high income taxpayers.
How Do You Make Estimated Tax Payments?
The IRS offers various options for making your tax payments, however, the quickest and easiest way is to pay online.
Pay online using The Electronic Federal Tax Payment System (EFTPS) or IRS Direct Pay
Pay by phone using the IRS2Go app
Pay by mail by sending in a check or money order with Form 1040-ES
Pay in person with cash at an IRS office or retail partner (includes added fees)
Pay by card using a third-party payment processor (includes added fees)
When Are Estimated Tax Payments Due?
Estimated tax payments are due every quarter, but you can choose to pay them on a weekly, bi-weekly, or monthly schedule if you’d like. Just make sure that you’ve made the full amount you expect to owe by the end of the quarter. The estimated tax payment deadlines are:
Q1 (January 1 - March 31): April 15
Q2 (April 1 - May 31): June 15
Q3 (June 1- August 31): September 15
Q4 (September 1 - December 31): January 15
If the due date falls on a Saturday, Sunday, or legal holiday, then the deadline will be moved until the next business day. Missing the estimated tax payment deadline may incur a penalty, even if you receive a refund when you file your tax return.
What Happens If You Don’t Make Estimated Tax Payments?
If you underpay or do not pay your taxes, then you may be charged an underpayment penalty. The penalty depends on how much you owe and how long you have had an outstanding balance. You can typically avoid a penalty if you pay at least 90% of the taxes owed for the tax year or pay 100% of taxes on your prior year tax return, whichever is lower.
Get Help with Your Estimated Tax Payments
Need help calculating your estimated tax payments? When you file with one of our tax preparers here at Northside Tax Service, they can help you calculate and set up your estimated tax payments. Give us a call at (360) 922-0235 to learn more!
Disclaimer: This material is prepared for informational purposes only, and is not tax advice. Please speak with a tax professional or view the resources below to see how this information may apply to you.
