How to Calculate and Make Estimated Tax Payments

Updated for tax year 2024.

If you’re like most taxpayers, you receive salary and wages from your employer and never have to worry about how to make estimated tax payments.

Even if you receive additional income on the side, such as interest and dividends, stock gains, or freelance income, the income tax withheld from wages usually covers your total income tax. But if you have significant income other than wages, you need to increase the amount withheld from your pay, so your taxes are covered. That’s where estimated tax payments come in.

When to make estimated tax payments

If you have little or no income tax withheld from wages and earn significant other income, you may need to make quarterly estimated tax payments to the Internal Revenue Service (IRS). Otherwise, you could owe interest and penalties when you file your tax return.

You may need to make quarterly payments if you have significant taxable income from any of the following sources:

• Self-employment income (e.g., freelancer, independent contractor)
• Small business owner income
• Investment income
• Unemployment benefits
• Retirement plan withdrawals
• Gambling income

Don’t worry about estimated tax payments if you expect to owe only a small amount of tax. You should only pay quarterly estimated tax payments if you anticipate a tax bill of at least $1,000 when you file.

Safe harbor amount

Even if you owe more than $1,000 when you file, you won’t pay the penalty if your total income tax withholding and timely estimated tax payments equal at least 90% of the tax shown on this year’s return or 100% of the tax shown on your previous year’s tax return.

This is called the “safe harbor amount.” The safe harbor provision is beneficial if your income fluctuates significantly, or you won’t know how much profit you’ll make for the year until you complete year-end calculations.

Calculating estimated payment amounts

If you need to make estimated tax payments, use TaxAct^® to calculate those amounts. TaxAct can help you estimate your payment based on a worksheet calculation or your tax liability for the previous year.

If you have zero tax liability for the previous year and were a U.S. citizen or resident alien all year, you don’t have to make estimated payments for this year. However, if you have significant income for this year, you may choose to make quarterly payments anyway, so you’re not faced with a massive bill at tax time.

Consider integrating a tax calculator seamlessly into your financial routine for effortless estimation of your tax obligations. With resources like TaxAct, you can ensure accurate calculations tailored to your specific income sources, deductions, and financial circumstances. 

Note: Farmers and fishermen get special consideration for estimated tax payments. If two-thirds of your gross income is from farming or fishing, you only have to pay 66.6% of the current year’s estimated tax liability.

Filing dates for federal quarterly estimated tax payments

Estimated tax payments are due every quarter. However, the tax deadlines are not perfectly spaced throughout the year. Due dates generally fall on the 15th. However, when a due date falls on a weekend or holiday, your quarterly payment is due the following business day.

Here are the quarterly estimated tax payments due dates for 2024:

And the quarterly estimated tax payments due dates for 2025:

How to make quarterly estimated tax payments

There are several ways to make estimated tax payments:

• Payment vouchers with TaxAct: Our tax software can help you calculate your quarterly payments and print quarterly payment vouchers. Once printed, just mail the voucher and your check or money order to the IRS by each due date.
• Electronic Funds Withdraw: Another easy way to make quarterly estimated tax payments is through Electronic Funds Withdraw. With this method, you have quarterly payments deducted from your bank account automatically. You can set this up in TaxAct as well.
• Credit card and debit card payments: The IRS accepts payments via credit and debit cards both online at irs.gov and over the phone. Please note that using a credit or debit card will incur an additional convenience fee charged by your bank.
• Electronic Federal Tax Payment System: Another way to make quarterly estimated tax payments is through the Electronic Federal Tax Payment System (EFTPS), a free online payment system. If you want to use EFTPS, be sure to plan ahead — you can’t set it up or use it to pay your tax on the day your payment is due.

Don’t forget to make estimated tax payments for your state taxes as well (if necessary).

Tax Tip: If you have an overpayment on one year’s tax return, you can use it to get a head start on estimated tax payments for the following year. It’s as simple as applying all or a portion of your overpayment to the first quarter of your next year’s tax liability instead of receiving it as a refund.

Strategies for making estimated tax payments easier

The biggest hurdles to making estimated tax payments are:

• Remembering to make the payments.
• Having the money on hand.

Don’t worry, though — there are some easy steps you can take to ensure you don’t miss payments and that you have enough cash to cover your estimated taxes.

1. Set aside money as you earn it.

As you receive income throughout the year, try to put aside an amount for taxes. If you create a separate account for taxes, you can move money into it once a week or every month, so you know the money’s there when you need it.

If, for example, you sell a large capital asset for a gain and receive a large chunk of money, plan to put a portion of your gain in your tax reserve account or make an extra payment to the IRS. That way, you’ll know you’ve got your taxes covered.

On the other hand, if you make less money during the year or have more deductions than you expected, you can always decrease the amount you pay each quarter.

2. Set up reminders for payment due dates.

One of the easiest things you can do is mark the due dates for estimated tax payments on your calendar. If you keep a mobile calendar, set up reminders for yourself ahead of time. These are some of the most important dates of the year to remember if you pay quarterly taxes, so you don’t want to miss them!

3. Recalculate what you owe every quarter.

At least once a quarter, consider recalculating your estimated taxes for the year. That way, you don’t have big surprises about your tax liability at year-end. For more info on this topic, check out our Guide to Adjusting Your Self-Employed Estimated Tax Payments.

The bottom line

Estimated tax payments are a crucial part of managing your tax obligations if you earn significant income outside of regular wages. By staying on top of due dates, accurately calculating your payments, and using resources like TaxAct, you can avoid penalties and make the process much more manageable. Setting aside money regularly, creating reminders, and recalculating your payments each quarter will help ensure you’re always prepared for tax season. With a bit of planning, you can confidently stay on track and minimize any financial surprises come tax time.

This article is for informational purposes only and not legal or financial advice.

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