Who Is Required to Pay Estimated Taxes?
Taxpayers with income not taxed at the source generally have a quarterly estimated tax obligation. This includes those receiving income from the following sources:
- Self-employment
- Interest
- Dividends
- Alimony
- Capital gains from selling stock, bonds, cryptocurrency, and other assets
- A business, including rental property income
- Prizes and awards
According to the IRS, you are generally required to pay estimated quarterly taxes if both of the following apply:
- You expect to owe at least $1,000 in federal income taxes as of the due date of your return (April 15th in most years) after accounting for your withholding and refundable credits ; and
- You expect your withholding and refundable credits to cover less than 90 percent of your tax liability for the year, 100 percent of your liability for the last year (whichever is smaller), or 110% of the prior year for certain high earners.
Why Do I Have to Pay Estimated Taxes?
Under US law, taxpayers are required to “pay as they go.” This is normally handled by your employer, who withholds tax from your pay and sends it to the IRS on your behalf. However, most income other than wages is not subject to withholding at the source. Failure to pay enough tax throughout the year—whether through withholding, estimated tax payments, or a combination of the two—could result in an underpayment penalty and interest charges on the imputed underpayment.
When Are Estimated Taxes Due?
The estimated tax payment schedule applicable in most years is listed below. Dates that fall on a weekend or federal holiday are replaced by the next business day.
| Income Period | Estimated Tax Payment Due Date |
| January 1 – March 31 | April 15 |
| April 1 – May 31 | June 15 |
| June 1 – August 31 | September 15 |
| September 1 – December 31 | January 15 of the following year |
How Do I Pay Estimated Taxes?
Pay quarterly taxes directly to the IRS, either online or by paper check. To calculate the amount you owe, figure out your estimated tax burden for the entire year and then divide this number into four equal payments. If you are unsure how much you will earn in a year, you can use your tax return from the previous year to get an idea of how much to pay to avoid a penalty. An overpayment can be claimed as a refund when filing your tax return for the year.
Do I Have to Pay State Estimated Taxes?
Almost all states that impose an income tax also have estimated tax requirements. These are similar to federal requirements, but different states have different income thresholds and penalties for estimated taxes, so make sure you understand the rules where you live. Look for the state payment vouchers on last year’s tax return if you are unsure of how much to pay.
Our team prepares tax estimates and corresponding payment vouchers as part of the tax return preparation process. We can also refine the estimate at various points during the year with actual income information replacing assumptions made earlier in the year. If you would like us to prepare a tax estimate or have other questions, please don’t hesitate to get in touch!