Taxpayers are generally required to pay taxes on their income as its 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.
Check Tax Withholding Rate Each Year
Employees subject to tax withholding determine how much they want withheld from their wages by completing IRS Form W-4. Most employees complete the Form W-4 when they start a new job, but many are unaware that they have the option to change or revise the form at any time. It is important to regularly check your tax withholding to ensure the proper amounts are being withheld from your wages; this should be done at least once a year, preferably in January. If your employer is not withholding enough taxes from your wages, you may be required to make estimated tax payments to the IRS (and you may also be in for a surprise tax bill during tax season).
Use the IRS's Tax Withholding Estimator tool to check whether your employer is withholding the proper amount of taxes from your wages. If you would like for your employer to withhold more or less in taxes, complete a new IRS Form W-4 and give it to your employer.
Who is Required to make Estimated Tax Payments?
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.
Estimated Tax Payment Schedule
Estimated tax payments are due at four different periods throughout the year:
April 15th (for the period January 1st - March 31st);
July 15th (for the period April 1st - May 31st);
October 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.
How to Make Payments
Taxpayers may make estimated tax payments using any of the following options:
Direct Pay using a bank account;
Pay by credit or debit card;
Submit payment through the Electronic Federal Tax Payment System;
Mail a check or money order to the IRS; or
Pay cash at a retail partner.
For more information, see the following IRS resources:
About the Author
Attorney Jordan D. Howlette is the President of MyTaxRights, LLC and the managing-member of JD Howlette Law, LLC, a civil litigation firm that represents individuals and businesses involved in tax disputes with the IRS, the United States Department of Justice (DOJ), and various state departments of revenue. A former trial attorney with the DOJ’s Tax Division, Jordan leverages his extensive background in tax litigation to educate others about their federal tax rights and responsibilities. Each tax season, Jordan also volunteers as a tax coach with the Center for the Advancement of Tax Equity, where he teaches others how to self-prepare and file their taxes through the non-profit's free tax clinics.