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Understanding Estimated Tax Payments

Taxpayers are generally required to pay taxes on their income as it's received or earned. For most employees, these taxes are paid automatically through what is known as tax withholding---the process by which an employer withholds a prefixed amount from an employee's wages to cover the employee's payroll tax obligations (e.g., income tax, social security tax, and Medicare tax). However, if you are self-employed or an independent contractor, then you will generally need to make estimated tax payments to the IRS because you are not subject to employee tax withholding. Sole proprietors, partners, and S corporation shareholders may also need to make estimated tax payments.

Who Has to Pay Estimated Taxes?
Taxpayers generally must make estimated tax payments throughout the year if they expect to owe $1,000 or more in taxes when they file their next tax return. Corporations generally must make these payments throughout the year if they expect to owe $500 or more on their next tax return.

When Are Estimated Tax Payments Due?
Estimated tax payments are due at four different periods throughout the year:

  • April 15th (for the period January 1st - March 31st);

  • June 15th (for the period April 1st - May 31st);

  • September 15th (for the period June 1st - August 31st); and

  • January 15th (for the period September 1st - December 31st).

Note, If you do not pay enough tax by the due date of each payment period, you may be charged a penalty even if you are due a refund when you file your income tax return.

Calculating Your Estimated Tax Payments

Individuals, including sole proprietors, partners, and S corporation shareholders, generally use IRS Form 1040-ES to determine their estimated tax payment amounts. Corporations generally use IRS Form 1120-W. However, to obtain a quick, general estimate of your estimated tax payment amounts, use Get It Back Campaign's free calculator.

How to Make Payments
The easiest way to make a payment is through the IRS's Electronic Federal Tax Payment System. If you do not already have a EFTPS PIN, you'll need to create a new account for yourself or your business. Once registered, you'll be able to seamlessly submit your estimated tax payments electronically through EFTPS. Alternatively, you may use any of the following options to make a payment:

  1. Direct Pay using a bank account;

  2. Pay by credit or debit card;

  3. Mail a check or money order to the IRS; or

  4. Pay cash at a retail partner.

For more information on estimated tax payments, see MyTaxRights's blog article entitled Some taxpayers may be required to make estimated tax payments.

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