How Estimated Quarterly Taxes Work

Learn how and when to pay estimated taxes — plus find out whether you need to worry about them in the first place.
Tina OremFeb 12, 2021
Do You Need to Pay Quarterly Taxes? Here's What to Know

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Depending on the sort of work you do or how you're paid, you might need to settle your tax bill via estimated quarterly taxes.

People who aren't having enough withheld. The IRS says you need to pay estimated quarterly taxes if you expect:

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The self-employed. Independent contractors, freelancers and people with side gigs are prime candidates for estimated quarterly taxes, says Bess Kane, a CPA in San Mateo, California. That’s because there’s no tax automatically withheld on their income, she explains.

Landlords and investors (maybe). People with rental income and investments might need to pay estimated quarterly taxes, too — even if their employers withhold taxes from their paychecks.

“Those might not always be calculated into their withholding amount, and then they come up short and end up having to pay an estimated tax penalty and don't even know what estimated taxes are,” says Thomas Mangold, a CPA in Austin, Texas.

According to the IRS, you don’t have to make estimated tax payments if you’re a U.S. citizen or resident alien and you had no tax liability for the previous full tax year. And you probably don’t have to pay estimated taxes unless you have untaxed income.

For 2021, here's when estimated quarterly tax payments are due:

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These dates don’t coincide with regular calendar quarters, so plan ahead. And you don’t have to make the payment due in mid-January if you file your tax return and pay what you owe by the end of the month.

You can make payments more often if you like, Kane says.

“I think it's easier to make 12 smaller payments than four larger payments," she says. "If you owe $1,200 for the year, I would rather pay $100 a month than $300 four times a year. And if we're talking bigger numbers, it gets pretty extreme.”

There's more than one way.

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You can mail your estimated tax payments with IRS Form 1040-ES. You can pay electronically as well using the IRS’s Direct Pay system or the U.S. Treasury’s Electronic Federal Tax Payment System, for example. Paying with a credit card carries of fee of around 2%.

You can even pay in cash at certain .

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The IRS will charge penalties if you didn’t pay enough tax throughout the year. The IRS can charge you a penalty for late or inadequate payments even if you're due a refund when you file your tax return.

The IRS might give you if:

“If you're married and your spouse has a regular job and is having taxes withheld, he or she may have enough taxes withheld to cover the two of you,” Kane explains.

You can accomplish this by giving his or her employer a new Form W-4, instructing how much tax to withhold from each paycheck. You can change your W-4 any time. If you’re getting a pension or annuity, use Form W-4P.

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