Federal Income Tax

Quarterly Tax Payments

Quarterly tax payments must be made by individuals, sole proprietors, partners, and S corporation shareholders. The quarterly tax payments are also known as estimated tax payments. The taxpayers must estimate taxes owed and pay the IRS using Form 1040-ES or Form 1120-W.

Form 1040-ES is for individuals and Form 1120-W is for corporations. If you’re an individual and expect to owe at least $1,000 in taxes, you must make estimated payments. This is $500 for corporations. However, the quarterly estimated tax payments are only effective if your income isn’t subject to withholding.

So, as an individual who works for an employer and the income you earn is subject to withholding, you aren’t required to make quarterly estimated tax payments.

How to calculate estimated tax payments?

Before you get to figuring out how much to pay in quarterly estimated tax payments, you need to know whether or not you are required to do this.

  • If you don’t have tax liability for the prior year, you’re a U.S. citizen or resident for the duration of the the year, and your tax year is a 12-month period.

Meeting all the requirements above will exempt you from making quarterly estimated tax payments. That said, make sure you are required to make quarterly estimated payments in the first place.

How to pay quarterly estimated taxes?

There is more than one way you can make quarterly estimated tax payments. You can use your credit card or debit card to pay estimated taxes through an IRS-authorized payment processor or use your bank account to pay on Direct Pay. These are the most common ways taxpayers use to pay their taxes. However, not the most optimal and convenient.

Assuming you’re going to make quarterly federal estimated tax payments often—at least 4 times a year, use EFTPS instead. The EFTPS, also known as Electronic Federal Tax Payment System allows taxpayers to make federal estimated tax payments weekly, bi-weekly, and monthly. This ensures that you’re up to your tax payments.

As long as you pay estimated taxes for each week, you will meet the needed tax payments for that quarter.

Don’t underpay estimated taxes

Underpaying estimated taxes or even withholding under the taxes owed to a certain degree can result in paying tax penalties.

If you owe more than $1,000 in taxes after subtracting the estimated tax payments and credits you claim on your tax credits, you will pay a tax penalty. This doesn’t apply to everyone though. For example, if you earned income unevenly throughout the tax year, you are most likely to dodge these penalties.

Use Electronic Federal Tax Payment System to Pay Estimated Taxes

There are many benefits to paying not just quarterly estimated tax payments but any other taxes on EFTPS.

The EFTPS allows taxpayers to pay estimated taxes weekly, bi-weekly, and monthly. By the end of the quarter, you can see whether or not you’ve paid enough in estimated tax payments.

Click here to enroll in EFTPS to pay individual and business taxes.

If the estimated taxes paid during the quarter is less than you should have—simply, figure out the difference and pay the IRS. You can also see the previous payments you’ve made in the past and the amounts. This will also help you figure out the total taxes paid and get an idea of whether or not you owe the IRS.

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