Understanding Estimated Tax Payments - Made Easy

03 Apr 2024

Understanding Estimated Tax Payments - Made Easy

Estimated Tax Payments —heard of them, but not quite on your radar? Should they be? With a couple of new gigs under your belt, the question arises: should you be handling this every quarter? If navigating tax matters isn't your forte, fear not—we've got you covered. Let’s break down estimated tax payments together.

Who Need to Make Estimated Tax Payments?

If you're an individual, including sole proprietors, partners, or S corporation shareholders, and you anticipate owing $1,000 or more in taxes when you file your return, you'll likely need to make estimated tax payments. For corporations, the threshold is $500 or more.

How to Calculate Estimated Tax Payments

Individuals and certain entities typically use Form 1040-ES to calculate estimated tax. Nonresident aliens use Form 1040-ES(NR). To figure out your estimated tax, you'll need to project your adjusted gross income, taxable income, potential taxes, deductions, and credits for the year. A good starting point is to refer to your prior year's income, deductions, and credits from your federal tax return. You can use the worksheet provided in Form 1040-ES to assist in your calculations.

When to Make Estimated Tax Payments

The tax year is divided into four payment periods, each with its specific due date. Missing these deadlines may result in penalties, even if you're owed a refund upon filing your tax return. Here are the due dates for estimated tax payments:

January 1 to March 31: Payment due by April 15
April 1 to May 31: Payment due by June 15
June 1 to August 31: Payment due by September 15
September 1 to December 31: Payment due by January 15 of the following year

How to Submit Estimated Tax Payments

There are various methods to pay estimated taxes

Mail: Send your payment along with Form 1040-ES
Online, Phone, or Mobile: Pay electronically using the IRS2Go app or the IRS Website.
For further details and to discover all available payment options, visit IRS.gov/payemnts

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