Estimated Taxes: What They Are and When They Are Due

Estimated taxes are periodic payments made by individuals and businesses to the IRS on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards.

Who Needs to Pay Estimated Taxes?

If you expect to owe $1,000 or more in tax when you file your return, you generally need to make estimated tax payments. For corporations, the threshold is $500. This applies to sole proprietors, partners, and S corporation shareholders.

When to Pay Estimated Taxes – The tax year is divided into four payment periods:

  • First Payment: April 15
  • Second Payment: June 15
  • Third Payment: September 15
  • Fourth Payment: January 15 of the following year

The next estimated tax payment is due on June 15. If a payment due date falls on a weekend or legal holiday, the payment is considered timely if made on the next business day.

How to Pay Estimated Taxes

You can pay estimated taxes online through the IRS website, by phone, using the IRS2Go app, or by mailing the provided payment vouchers found in the front of your blue tax folder. For your convenience, we have included vouchers for each payment period, instructions, and a pre-addressed envelope. Additionally, the Electronic Federal Tax Payment System (EFTPS) offers another convenient option for making payments.

Penalties for Underpayment

Failing to pay enough tax throughout the year can result in a penalty. You can avoid this penalty if you owe less than $1,000 in tax after subtracting withholding and credits or if you paid at least 90% of the tax for the current year or 100% of the tax shown on the prior year’s return, whichever is smaller. Special rules apply for farmers, fishermen, and certain higher income taxpayers.

For more detailed information, please visit the IRS websites or contact our office to speak with one of our CPAs.

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