The IRS requires that you pay the taxes you owe throughout the year. This is done either through witholdings from your earnings or by the payment of estimated taxes.
Estimated taxes are to be paid quarterly (April 15th, June 15th, September 15th, and January 15th) and are generally paid by taxpayers who receive their income from sources other than salaries and wages, such as a sole proprietors, partner, S corporation shareholders and/or a self-employed individual.
You can also elect to make estimated payments if the amount of income tax being withheld from your salary, pension, or other income is not enough.
Am I required to make Estimated Tax Payments?
The general rule is that you will pay estimated tax for the current tax year if both of the following apply:
- You expect to owe at least $1,000 in tax for the current tax year after subtracting your witholdings and credits.
- You expect your withholding and credits to be less than the smaller of
- 90% of the tax to be shown on your current tax return, OR
- 100% of the tax shown on your prior year tax return. Your prior year tax return must cover all 12 months.