Why make quarterly tax payments

There are several ways you can go about paying your quarterly taxes:. Pay online. You can go to the IRS payment page and set up online payments for your taxes using a bank account or a debit card. Pay by phone. And there are a couple more things you need to remember. First, remember the taxes above are just an estimate. You still need to file an annual tax return along with everyone else, showing what you actually made during the year.

And second, if business is going well and you see that your income is going to be higher or lower than you thought it would be, you can always adjust your estimated taxes each quarter. If not, you might end up paying more on Tax Day if you underpaid or get a tax refund if you overpaid, just like everyone else. Take our quiz to find out if you should self-file or work with a tax pro this year. We know just the right people to help you set up your quarterly taxes with confidence.

Find a tax professional in your area today! Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since Millions of people have used our financial advice through 22 books including 12 national bestsellers published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

Guided Plans. Likewise, pursuant to Notice , the due date for your second estimated tax payment was automatically postponed from June 15, , to July 15, The IRS lowered to 80 percent the threshold required for certain taxpayers to qualify for estimated tax penalty relief if their federal income tax withholding and estimated tax payments fell short of their total tax liability in In general, taxpayers must pay at least 90 percent of their tax bill during the year to avoid an underpayment penalty when they file.

On January 16, , the IRS lowered the underpayment threshold to 85 percent and on March 22, , the IRS lowered it to 80 percent for tax year This additional expanded penalty relief for tax year means that the IRS is waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.

Taxpayers who have not filed yet should file electronically. The tax software was updated and uses the new underpayment threshold and will determine the amount of taxes owed and any penalties or waivers that apply.

This penalty relief is also included in the revision of the instructions for Form , Underpayment of Estimated Tax by Individuals, Estates, and Trusts. Taxpayers who have already filed their federal tax return but qualify for this expanded relief may claim a refund of any estimated tax penalty amount already paid or assessed. Taxpayers cannot file this form electronically. More In File. Who Does Not Have To Pay Estimated Tax 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.

You had no tax liability for the prior year You were a U. When To Pay Estimated Taxes For estimated tax purposes, the year is divided into four payment periods.

The penalty may also be waived if: The failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or You retired after reaching age 62 or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect. Expanded penalty waiver available if tax withholding and estimated tax payments fell short; refund available for those who already paid underpayment penalty The IRS lowered to 80 percent the threshold required for certain taxpayers to qualify for estimated tax penalty relief if their federal income tax withholding and estimated tax payments fell short of their total tax liability in Related Topics Business Structures.

Online Tax Calendar. The safest option to avoid an underpayment penalty is to aim for " percent of your previous year's taxes. If you satisfy either test, you won't have to pay an estimated tax penalty, no matter how much tax you owe with your tax return. If you expect your income this year to be less than last year and you don't want to pay more taxes than you think you will owe at year end, you can choose to pay 90 percent of your estimated current year tax bill.

If the total of your estimated payments and withholding add up to less than 90 percent of what you owe, you may face an underpayment penalty. So you may want to avoid cutting your payments too close to the 90 percent mark to give yourself a little safety net. If you expect your income this year to be more than your income last year and you don't want to end up owing any taxes when you file your return, try to make enough estimated tax payments to pay percent of your current year income tax liability.

You need to come up with a good estimate of the income and deductions you will report on your federal tax return. You can use TurboTax tax preparation software to do the calculations for you, or get a copy of the worksheet accompanying Form ES and work your way through it.

Either way, you'll need some items so you can plan what your estimated tax payments should be:. One easy way to get a jump on paying your next year's taxes is to apply your previous year's tax refund to your next year's taxes.

If you won't have federal income tax withheld from wages, or if you have other income and your withholding will not be enough to cover your tax bill, you probably need to make quarterly estimated tax payments.

Having all or part of your overpayment applied to your estimated taxes is a relatively painless way to take care of at least some of what you owe for coming year. You could end up owing the IRS an underpayment penalty in addition to the taxes that you owe. The penalty will depend on how much you owe and how long you have owed it to the IRS. Usually, you pay your estimated tax payments in four equal installments. But you might end up with unequal payments in some circumstances:.

However, you may still owe an underpayment penalty for the first quarter. You have special criteria to meet, but you may end up paying less in estimated taxes. You're considered a qualified farmer or fisherman if you earn more than two thirds of your taxable gross income from farming or commercial fishing. If you're not sure you qualify, or how this all works, TurboTax can help you figure your taxable gross income and what fishing and farming income you can include as qualified income.

TurboTax Self-Employed uncovers industry-specific deductions. Some you may not even be aware of.