Estimated taxes normally have to paid if you do not withhold taxes via your employer or if the amount of income tax being withheld from your salary, pension, vendor payments or other income is insufficient.
Estimated taxes are generally paid by small business’, self-employed or gig workers with variable sources of income/expenses or those that have been notified by the IRS to pay it based on past tax filings.
Below is the table which shows when estimated tax payments are generally due for the current tax year
|Installment No.||For The Period||Due Date|
|Q1 Payment||January 1 to March 31||April 18th|
|Q2 Payment||April 1 to May 31||June 15th|
|Q3 Payment||June 1 to August 31||September 15th|
|Q4 Payment||September 1 to December 31||January 16th|
Key points to remember with estimated taxes
- Installments or estimated tax payment for a given period you earned income are made over subsequent periods, with the first installment due in the first taxable period’s due date. E.g. if you have income on which you must pay estimated taxes between April 1 and May 31, you must make your first (of three, say) installment payment by April 15, with subsequent ones due in September and January of the next year.
- If you don’t have any taxable income you don’t have to make an estimated tax payment, even if you had income in a similar period in the past tax year. Remember these are estimated income tax payments and can vary year to year.
- The date of the U.S postmark is considered the date of payment. If the due date falls on a weekend or public holiday the payment will be considered on time if you make on the next business day.
- You don’t have to make a separate fourth quarter payment if you file your tax return by the end of January of the following year. E.g, the January 18th payment is not needed if you file by January 31, 2022, and pay the entire balance due with your return.
- Penalties and late payments. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty when you file your return. Even if you expect a refund when you file your annual tax return, you need to pay your estimated taxes quarterly or face an IRS penalty.
Exceptions or relief are provided in some cases (E.g. if this is the first time you have had to pay estimated taxes), but subsequent delays will likely result in a penalty. The penalty doesn’t apply if you owe less than $1,000 in tax or if your withholding or estimated tax payments equal at least 90% of your tax liability.
- Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. This form is for those expected to pay taxes of $1,000 or more and are filing as a sole proprietor, partner, S corporation shareholder and/or a self-employed individual.
- You also need to pay estimated taxes if you expect your withholding and refundable credits to be less than either 90% of the tax listed on your 2023 tax return or 100% of the tax listed on your 2022 tax return, which must include all 12 months.
- Corporations use different forms. Given tax payers have to figure/estimate taxes due on their own, based on IRS guidelines, it is worthwhile engaging the services of a good accountant to help with filing your quarterly taxes. Automated tax software like Turbo Tax will also provide you with details with your estimated tax payments for the coming year based on your most recent filing via their software.
- You do not have to pay estimated tax for the current year if: 1) You had no tax liability for the prior year (e.g. got a refund); AND 2) You were a U.S. citizen or resident for the whole year; AND 3) Your prior tax year covered a 12 month period.
- Note that the above deadlines are for federal IRS estimated tax payments. If you owe estimated state taxes, those may be due on different schedules. That’s why its always a good idea to check your state’s tax website for due dates.
- Gig economy workers often forget to pay estimated taxes on their variable earnings. With recent changes around Form 1099-K thresholds, payment processing vendors now need to report gross payments (across any number of transactions) exceeding $600. This data is shared with the IRS so they are aware of taxes owed and expect associated estimated tax payments.
How to Pay your Estimated Taxes
There are a number of ways to pay estimated taxes to the IRS. You can mail in your payment or pay online (recommended) via the IRS site and your account.
Make sure you only make payment to the official IRS address or via their website. There are a lot of scams around tax payments so you want to ensure you are paying via the approved channels.
The various payment methods are described in the instructions for Form 1040-ES. You can also see IRS Publication 505 for more details on estimated taxes or leave a question in the comments section below.