How can I determine if I need to make estimated tax payments throughout the year?

Criteria for Making Estimated Tax Payments

Who Needs to Make Estimated Tax Payments?

Individuals, including sole proprietors, partners, and S corporation shareholders, generally need to make estimated tax payments if they anticipate owing $1,000 or more in taxes when their return is filed. Corporations typically must make estimated tax payments if they expect to owe $500 or more in taxes when their return is filed.

Conditions for Estimated Tax Payments:

1. You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits.

2. You expect your withholding and refundable credits to be less than the smaller of:

  - 90% of the tax to be shown on your current year's tax return, or

  - 100% of the tax shown on your prior year’s tax return (provided the prior year covered all 12 months).

Exceptions to the Rule:

You do not have to pay estimated tax for the current year if you meet all three of the following conditions:

- You had no tax liability for the prior year,

- You were a U.S. citizen or resident alien for the whole year,

- Your prior tax year covered a 12-month period.

Special Rules:

- There are different rules for farmers, fishermen, and certain higher-income taxpayers.

- If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. This can be done by filing a new Form W-4 with your employer.

Payment Periods:

For estimated tax purposes, the year is divided into four payment periods, each with a specific due date. If you do not pay enough tax by the due date of each payment period, you may be charged a penalty.

Payment Methods:

- Estimated tax payments can be made with Form 1040-ES by mail.

- Payments can also be made online, by phone, or from a mobile device using the IRS2Go app.

Additional Information:

- For more details on who must pay estimated tax, refer to the worksheet in Form 1040-ES, Estimated Tax for Individuals.

- Nonresident aliens use Form 1040-ES(NR) to figure estimated tax.

- To figure your estimated tax, you must estimate your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.

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Sources:

Estimated taxes | Internal Revenue Service 2024-08-03

Self-employed individuals tax center | Internal Revenue Service 2024-08-03

Estimated tax | Internal Revenue Service 2024-08-03

Publication 501 (2023), Dependents, Standard Deduction, and Filing ... 2024-08-03

Publication 504 (2023), Divorced or Separated Individuals 2024-08-02

Publication 969 (2023), Health Savings Accounts and Other Tax-Favored ... 2024-08-03

2023 Instructions for Form 990-PF | Internal Revenue Service 2024-08-02

Topic no. 756, Employment taxes for household employees 2024-08-02

Publication 970 (2023), Tax Benefits for Education | Internal Revenue Service 2024-08-03

Questions and Answers for the Additional Medicare Tax 2024-08-03