Are You Required to Pay Estimated Tax Payments? Here’s What You Need to Know 

Are You Required to Pay Estimated Tax Payments?

If you are self-employed or have income that is not subject to tax withholding, you may be required to pay estimated tax payments. This article will explain what estimated tax payments are, who needs to pay them, and how to calculate them. 

Summary 

The United States tax system is based on a “pay-as-you-go” model. Estimated tax payments are payments made to the IRS on a quarterly basis to pay taxes on income that is not subject to tax withholding. You will need to make estimated tax payments if you expect to owe at least $1,000 in taxes. 

For most employees, taxes are withheld from their paychecks by their employer. However, if you are self-employed or have income that is not subject to tax withholding, you may be required to pay estimated tax payments. 

In this article, we’ll explore what estimated tax payments are, who needs to pay them, and how to calculate them. 

You may be required to pay estimated taxes if you expect to owe at least $1,000 in tax for the current year after subtracting your withholding and refundable credits³.

What are estimated tax payments? 

Estimated tax payments are payments made to the IRS on a quarterly basis to pay taxes on income that is not subject to tax withholding. This includes income from self-employment, rental income, investment income, and other sources. 

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Who needs to pay estimated tax payments? 

If you are self-employed or have income that is not subject to tax withholding, you may have to pay estimated tax payments. Generally, you will need to make estimated tax payments if you expect to owe at least $1,000 in taxes after subtracting your withholding and refundable credits. 

How to calculate estimated tax payments 

To calculate your estimated tax payments, you’ll need to estimate your income, deductions, and credits for the year. You can use IRS Form 1040-ES to calculate your estimated tax payments and the Tax Withholding Estimator from the IRS. 

When are estimated tax payments due? 

• Estimated tax payments are due on a quarterly basis. The due dates are: 
• April 15 (for income earned from January 1 to March 31) 
• June 15 (for income earned from April 1 to May 31) 
• September 15 (for income earned from June 1 to August 31) 
• January 15 of the following year (for income earned from September 1 to December 31) 

What happens if you don’t pay estimated tax payments? 

If you don’t pay estimated tax payments, you may be subject to penalties and interest on the underpaid amount. The IRS may also require you to make estimated tax payments in the future. 

Frequently asked questions: 

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Conclusion: 

If you are self-employed or have income that is not subject to tax withholding, it’s important to understand whether you are required to pay estimated tax payments. By making these payments on a quarterly basis, you can avoid penalties and interest on underpaid taxes. If you’re unsure whether you need to make estimated tax payments, consult a tax professional or refer to IRS guidelines. 

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