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Tax Day may be the big IRS deadline for most taxpayers, but it’s far from the only tax deadline you may need to know about. If you need to make estimated tax payments, it’s important to know when the IRS expects to receive them.
It’s also vital to understand who may need to make estimated tax payments, and how making them — or failing to make them — could affect your federal income tax obligation.
Let’s look at when quarterly tax payments are due and some other things to know about estimated tax payments.
- What are quarterly tax payments?
- Who should make quarterly tax payments?
- When are quarterly tax payments due?
- How do I make quarterly tax payments?
- What should I do if I miss a quarterly tax payment?
The IRS expects taxpayers to pay their federal income tax obligation and other federal taxes (like alternative minimum tax and Medicare) throughout the year. This happens through payroll withholdings (if you’re a wage-earning employee), by making estimated tax payments or a combination of withholdings and estimated payments.
Estimated tax payments are just that — tax payments you make based on an estimation of what you expect your total tax obligation will be for the year. You estimate your tax due based on your expected adjusted gross income, how much of that income will be taxable, and any deductions or credits you may be eligible for. The IRS says you can use your previous year’s return as a guide.
If you make estimated tax payments, you do so on a quarterly basis.Get tips for better estimating your taxes
Generally, if you expect to owe $1,000 or more of federal income tax when you file your return, you should make estimated tax payments, the IRS says.
Many situations could leave you owing a big chunk of income tax. Here are a few examples.
- You’re self-employed so you don’t have an employer withhold taxes for you throughout the year.
- You receive income from interest, dividends or capital gains.
- You’re retired and receive distributions from an IRA.
- You had a large, unexpected windfall, such as a prize or award.
Making estimated tax payments could help ensure you don’t end up owing a lot of tax — and possibly penalties and interest for underpaying come Tax Day. And if you wind up overpaying your tax obligation because of your estimated tax payments, you might even get a refund.
Keep in mind that some people are required to make estimated tax payments, and making them late could mean facing a penalty — even when owed a refund.
Generally, estimated tax payments are due on these dates, according to the IRS.
|Due date||For the period:|
|April 15||Jan. 1 – March 31|
|June 15||April 1 – May 31|
|Sept. 15||June 1 – Aug. 31|
|Jan. 15 of the following year||Sept. 1 – Dec. 31|
If the due date falls on a Saturday, Sunday or legal holiday, the estimated payment is due on the next business day.
This article focuses on quarterly estimated tax payments for individuals, partners in a partnership, members of a limited liability company, and shareholders in an S-corp. Different due dates apply to fiscal year taxpayers (meaning your tax year doesn’t start on Jan. 1), farmers, fishermen and corporations. Fiscal year taxpayers, farmers and fishers can find more information about estimated payments in Publication 505. Corporations can find more information about making quarterly installments in Publication 542.
IRS Form 1040-ES includes an Estimated Tax Worksheet to help you calculate your total estimated tax for the year and break that total down into the quarterly estimates required.
To complete the worksheet, you’ll need to know your estimated adjusted gross income for the year, whether you’ll itemize deductions or claim the standard deduction, and the amount of any credits you’re eligible to take.
Once you’ve calculated the amount you need to pay, you have a few options for making your payment.
Pay via check or money order
Form 1040-ES has payment vouchers to include with a check or money order if you prefer to make your payment by mail. The form also includes the address to mail your check, depending on your state of residence.
You should make your check, money order or cashier’s check payable to U.S. Treasury. To ensure your payment gets applied to the correct taxpayer account, the IRS recommends including the following information on your check:
- Your name, address and daytime phone number
- Your Social Security number or employer identification number
- The tax year to which the payment applies
- The related tax form or notice number for an estimated tax payment (for example, Form 1040-ES)
Pay with cash
You should never mail cash with an estimated tax voucher. But if you prefer to pay with cash, the IRS partners with certain retailers to accept cash payments. Just be aware that there is a $1,000-per-day transaction limit and it takes five to seven days to process your payment using this method, so make your quarterly tax payment well in advance of the due date. Visit OfficialPayments.com/fed to find a local participating location and follow the instructions to make a cash payment.
Pay online using your bank account
The IRS allows taxpayers to pay their taxes, including quarterly estimates, directly from a checking or savings account using its free Direct Pay service.
When you use Direct Pay, you can make a same-day payment. But payments submitted after 8 p.m. Eastern time will be processed the next business day, so plan ahead to make sure your payment is processed on time to avoid penalties.
Pay by credit card, debit card or digital wallet
The IRS doesn’t accept credit card, debit card or digital wallet payments directly, but it does work with third-party payment processors that accept most cards and digital wallet options.
Keep in mind that these payment processors charge a fee, which varies depending on the service provider and payment method. You can find a schedule of fees and links to make a payment here.
If you don’t pay enough tax via withholding or estimated quarterly payments, or if you make your quarterly tax payments late, you may have to pay a penalty — even if you’re due a refund once you file your tax return. This is because the IRS says you should make estimated tax payments in four equal amounts. Then it calculates a penalty separately for each required installment.
If you miss a payment deadline, your best bet is probably to make the payment as soon as you can. You may also be able to request that the IRS waive the penalty if you missed your payment for one of these reasons.
- You experienced a casualty event, disaster or other circumstances beyond your control. The IRS says a casualty is damage, destruction or loss of property due to an unexpected, sudden and unusual — but identifiable — event.
- You’re 62 or older and retired from working, or you become disabled during the year, and you had a reason for the underpayment rather than willfully neglecting to make the payment.
The Instructions for Form 2210 include information on requesting a waiver of the estimated tax penalty.
Paying taxes every quarter instead of once per year may seem like a huge headache, but it’s one way to ensure you’re paying in enough money throughout the year to avoid a huge tax bill you can’t afford to pay at tax time. And depending on your circumstances, the IRS may require you to make estimated tax payments.
Also, the IRS may not be the only agency that expects to receive quarterly tax payments from you. Each state makes its own tax rules, so check with your state’s taxing authority to see whether you need to make estimated quarterly payments to your state as well.
Troy Grimes is a tax product specialist with Credit Karma Tax®. He’s worked in tax, accounting and educational software development for nearly 30 years. He has a bachelor’s degree in business administration with an emphasis in business analysis from Texas A&M University. You can find him on LinkedIn.