Do I Have to Pay Estimated Taxes for 2021?

Estimated taxes are payments made to the Internal Revenue Service (IRS) 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 after subtracting any withholding or credits.

Who Needs to Pay Estimated Taxes for 2021?

Generally, you need to make estimated tax payments if you meet the following criteria:

• You expect to owe $1,000 or more in taxes for 2021 after accounting for withholding and credits.
• You are self-employed or have other income that is not subject to withholding, such as interest, dividends, or rental income.

How to Determine if You Need to Pay Estimated Taxes

To determine if you need to make estimated tax payments, follow these steps:

1. Estimate your total income for the year, including wages, self-employment income, and any other taxable income.
2. Calculate your expected deductions and credits.
3. Subtract your deductions and credits from your estimated income to get your taxable income.
4. Multiply your taxable income by the applicable tax rate to calculate your estimated tax liability.
5. Subtract any withholding or credits you expect to claim from your estimated tax liability.

If the result is $1,000 or more, you will need to make estimated tax payments.

When to Make Estimated Tax Payments

Estimated tax payments are due on the following dates:

• April 15, 2021
• June 15, 2021
• September 15, 2021
• January 15, 2022

How to Make Estimated Tax Payments

You can make estimated tax payments online, by mail, or by phone.

• Online: You can make estimated tax payments through the IRS website using Direct Pay or the Electronic Federal Tax Payment System (EFTPS).
• By mail: You can mail your estimated tax payment to the address provided on Form 1040-ES, Estimated Tax for Individuals.
• By phone: You can make estimated tax payments by calling the IRS at 1-800-829-1040.

Penalties for Underpayment of Estimated Taxes

If you do not pay enough estimated taxes throughout the year, you may be subject to a penalty for underpayment of estimated taxes. The penalty is calculated based on the amount of tax you underpaid and the length of time you underpaid.

Exceptions to the Estimated Tax Requirement

There are a few exceptions to the estimated tax requirement. You do not need to make estimated tax payments if:

• You had no tax liability for the previous year.
• You were a U.S. citizen or resident alien for the entire year.
• Your prior tax year covered a 12-month period.

If you expect to owe $1,000 or more in taxes for 2021 after accounting for withholding and credits, you will need to make estimated tax payments. Estimated tax payments are due on April 15, June 15, September 15, and January 15. You can make estimated tax payments online, by mail, or by phone. If you do not pay enough estimated taxes throughout the year, you may be subject to a penalty for underpayment of estimated taxes.