It can be easy to put off paying your taxes until the dreaded ‘tax season’ arrives. However, breaking up these payments into smaller, more manageable chunks can not only be extremely helpful in removing stress and preventing back taxes, but also required depending on your situation.

What are estimated tax payments?

• A quarterly payment of taxes for the year based on the filer’s reported income for the period.

Who needs to make them?

• Individuals such as sole proprietors, partners, and S corporation shareholders, typically need to make estimated tax payments if they expect to owe $1,000 or more when their return is filed.
• Those who do not have taxes automatically withheld from their paychecks, as regular employees do.

Who doesn’t need to make them?

• Those who receive salaries and wages and ask their employer to withhold more tax from their earnings.
• Those who had no tax liability for the prior year, have been a U.S. citizen or resident alien for the whole year, and who’s prior tax year covered a 12-month period.

How do I calculate them?

• If you’re an individual, (sole proprietors, partners, and S corporation shareholders), use Form 1040-ES.
• If you’re a nonresident alien, use Form 1040-ES (NR).
• You must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.
• Start with your income, deductions, and credits for the prior year. Use your prior year’s federal tax return to guide you.
• Estimate the amount of income you expect to earn for the year.
• Estimated too high or too low? To avoid penalties, complete another Form 1040-ES worksheet to refigure your next quarter’s estimated tax.

When do I pay them?

There are four payment periods:

• January 1 – March 31 (due April 15)
• April 1 – May 31 (due June 15)
• June 1 – August 31 (due September 15)
• September 1 – December 31 (due January 15 of the following year)

Note: If these due dates fall on a Saturday, Sunday or legal holiday, payments are due the next business day.

How do I pay them?

• You can send estimated tax payments with Form 1040-ES.
• You can also pay online, by phone/mobile device, using the IRS2Go app.
• You can also pay through your online account, (IRS.gov/account), where your payment history and tax records are.
• All options are viewable at IRS.gov/payments
• Using the EETPS website is the easiest way for individuals and businesses to pay federal taxes.

What if I don’t pay them?

• You may have to pay a penalty for underpayment of estimated tax.
• Most taxpayers avoid this penalty if they owe less than $1,000 in tax after subtracting their withholding and credits, or if they paid at least 90% of the tax for the current year, or if 100% of the tax shown on the return for the prior year, whichever is smaller.
• If your income is received unevenly during the year, you can avoid or lower the penalty by annualizing your income and making unequal payments.
• Use Form 2210 or Form 2220 to see if you owe a penalty for underpaying your estimated tax.
• The penalty may also be waived if the underpayment was due to a casualty, disaster, or other unusual circumstance, or if you retired or became disabled during the tax year your estimated payments were required, or in the preceding tax year.

Written by: Sofia Ritz, Social Media Intern