Understanding Estimated Taxes
Estimated taxes are payments made throughout the year to cover the income tax you expect to owe when you file your annual tax return. These payments are required if you expect to owe more than $1,000 in taxes when you file.
Who Must Pay Estimated Taxes?
Individuals, including sole proprietors, partners, and S corporation shareholders, are generally required to make estimated tax payments if they expect to owe $1,000 or more in taxes when their return is filed.
Exceptions to the Rule
There are a few exceptions to the estimated tax requirement:
- You had no tax liability for the prior year.
- You were a U.S. citizen or resident alien for the whole year.
- Your prior tax year covered a 12-month period.
How to Calculate Estimated Taxes
To calculate your estimated taxes, you need to estimate your income, deductions, and credits for the year. You can use your prior year’s tax return as a starting point.
When to Pay Estimated Taxes
Estimated tax payments are due on the following dates:
- April 15th
- June 15th
- September 15th
- January 15th of the following year
How to Pay Estimated Taxes
You can pay estimated taxes online, by phone, or by mail.
Penalties for Underpayment
If you don’t pay enough estimated taxes throughout the year, you may have to pay a penalty when you file your tax return.
Avoiding Penalties
There are a few ways to avoid penalties for underpayment of estimated taxes:
- Pay at least 90% of the tax you owe for the current year.
- Pay 100% of the tax shown on your return for the prior year.
- Make equal payments throughout the year.
Estimated taxes are required for individuals who expect to owe more than $1,000 in taxes when they file their annual tax return. There are a few exceptions to this rule, and there are also ways to avoid penalties for underpayment.
Am I required to make quarterly estimated tax payments??
FAQ
Can I choose not to pay estimated taxes?
What happens if you don’t pay quarterly estimated taxes?
Are IRS estimated tax payments mandatory?
What is the exception for estimated taxes?
Do I need to pay estimated tax?
If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. If you don’t pay enough tax through withholding and estimated tax payments, you may have to pay a penalty.
Do I need to pay estimated taxes every quarter?
Usually, that’s enough to take care of your income tax obligations. But if you are self-employed or make money on your investments or rental property, you may need to make estimated tax payments every quarter, rather than wait until you file your annual tax return. Here’s how estimated taxes work. How do I calculate my estimated taxes?
Do I have to pay estimated taxes if I owe no taxes?
According to the IRS, you don’t have to make estimated tax payments if you’re a U.S. citizen or resident alien who owed no taxes for the previous full tax year. And you probably don’t have to pay estimated taxes unless you have untaxed income.
Do I have to make estimated tax payments if I’m married?
Or, if your adjusted gross income (2023 Form 1040, line 11) on your tax return was over $150,000 ($75,000 if you’re married and file separately), do you expect that your income tax withholding will be at least 110 percent of the total tax for the previous year? If so, then you’re not required to make estimated tax payments.