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Estimated Tax Payments




What are estimated tax payments, how do you pay them, and what happens if you don't?


Our tax system works on a pay-as-you-go system. Essentially the taxing authorities collect tax on a periodic basis throughout the year to prevent tax payers from spending those funds and being unable to pay their taxes once a year. Tax authorities also want to collect taxes on a regular basis because it allows them to improve their cash flows. If they wait until the following April 15th that cash is not available for them to use, whereas collecting it throughout the year allows them to access the funds earlier. Likewise many taxpayers feel the same and want to limit the amount of cash they pay in throughout the year so they can it for other things such as investments.


Who Has to Pay Estimated Taxes?

Employees have taxes taken out of their paychecks by their employer and it is then the employers job to pay these taxes. They often do not fall under the category of having to file and pay estimated taxes, however they may be if they have income from other sources, have special tax circumstances, or do not fill out their W-4s correctly. Self-employed individuals are often required to pay estimated taxes. Failure to pay the appropriate amount of estimated taxes throughout the year could result in a fine come tax time.


If you meet the following criteria from the IRS you are required to pay estimated taxes:

  • You expect you will owe at least $1,000 in taxes after refundable credits and withholding and

  • You expect your withholding and refundable credits to be less than the smaller of 90% of the tax to be shown on your tax return or 100% of the taxes owed on your prior year's tax return (this tax return must be a full 12 month return).

Each state's requirements vary and you should check your state and local taxing authority regulations for estimated tax requirements.


How To Pay Estimated Taxes

Form 1040-ES is used to pay federal estimated taxes. Forms vary from state to state so you should check with your state tax authority for information. Form 1040-ES has an estimated tax worksheet. Calculating estimated taxes can be tricky for some individuals and oftentimes working with a tax professional can help you pay in the correct amount of estimated taxes so you do not over or under pay. For more information on Form 1040-ES visit the following IRS link:

https://www.irs.gov/forms-pubs/about-form-1040-es


When are Estimated Payments Due?

Estimated payments are due to the IRS the following dates for 2019. Many states follow the same schedule, but you should always check to make sure.


  • April 15, 2019

  • June 17, 2019

  • September 16, 2019

  • January 15, 2020 (some exceptions for early tax filers)


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