Understanding Estimated Tax Payments: Due Dates and Essential Information for 2021

Estimated tax payments are a crucial aspect of the tax system for individuals and businesses that earn income not subject to withholding. Failing to make these payments on time can result in penalties and interest charges. This comprehensive guide will provide a detailed overview of estimated tax payments, including the due dates for 2021, who is required to make them, and the various payment options available.

Who Needs to Make Estimated Tax Payments?

Generally, estimated tax payments are required for individuals and businesses that expect to owe $1,000 or more in taxes for the year, after considering any withholding. This includes:

• Self-employed individuals
• Business owners
• Sole proprietors
• Partners
• S corporation shareholders
• Individuals involved in the sharing economy
• Corporations that expect to owe $500 or more in taxes

Due Dates for Estimated Tax Payments 2021

Estimated tax payments are due four times a year, with the due dates varying depending on the payment period. The due dates for 2021 estimated tax payments are as follows:

How to Calculate Estimated Tax Payments

To calculate your estimated tax payments, you need to estimate your taxable income and tax liability for the year. You can use the following steps:

1. Estimate your taxable income: Determine your expected income from all sources, including wages, self-employment income, investments, and any other taxable income.
2. Calculate your tax liability: Apply the appropriate tax rates to your estimated taxable income to determine your estimated tax liability.
3. Subtract any withholding: If you have any income subject to withholding, such as wages or pensions, estimate the amount of taxes that will be withheld during the year. Subtract this amount from your estimated tax liability.
4. Divide by four: The result is your estimated tax payment for each payment period.

Payment Options for Estimated Taxes

The IRS offers several convenient options for making estimated tax payments:

• Direct Pay: Pay directly from your bank account using the IRS website or the IRS2Go app.
• Credit or Debit Card: Pay using a credit or debit card through the Electronic Federal Tax Payment System (EFTPS).
• Check or Money Order: Mail a check or money order to the IRS at the address provided on the estimated tax payment voucher.
• Cash: Pay cash at certain retail partners, such as Walmart and 7-Eleven.

Consequences of Late or Underpayment

Failing to make estimated tax payments on time or paying less than the required amount can result in penalties and interest charges. The penalty is calculated as a percentage of the unpaid tax, and it accrues from the due date of the payment until the tax is paid in full.

Additional Resources

For more information on estimated tax payments, refer to the following resources:

• IRS Publication 505, Tax Withholding and Estimated Tax: https://www.irs.gov/pub/irs-pdf/p505.pdf
• IRS Form 1040-ES, Estimated Tax for Individuals: https://www.irs.gov/forms-pubs/about-form-1040-es
• IRS Form 1120-W, Estimated Tax for Corporations: https://www.irs.gov/forms-pubs/about-form-1120-w

By understanding the due dates, requirements, and payment options for estimated tax payments, you can avoid penalties and ensure timely fulfillment of your tax obligations.