By law, everyone must pay tax as they earn income. Generally, taxpayers must pay at least 90 percent of their taxes throughout the year through withholding, estimated or additional tax payments or a combination of the two. If they don’t, they may owe an estimated tax penalty when they file. Some taxpayers earn income not subject to withholding. For small business owners and self-employed people, that usually means making quarterly estimated tax payments.
Estimated Tax
- Generally, taxpayers need to make estimated tax payments if they expect to owe $1,000 or more when they file their 2022 tax return, after adjusting for any withholding.
- The IRS urges anyone in this situation to check their withholding using the Tax Withholding Estimator on IRS.gov. If the estimator suggests a change, the taxpayer can submit a new Form W-4 to their employer.
- Aside from business owners and self-employed individuals, people who need to make estimated payments also include sole proprietors, partners and S corporation shareholders. It also often includes people involved in the sharing economy.
- Corporations generally must make these payments if they expect to owe $500 or more on their 2022 tax return.
- Aside from income tax, taxpayers can pay other taxes through estimated tax payments. This includes self-employment tax and the alternative minimum tax.
- The remaining deadlines for paying 2022 quarterly estimated tax are: June 15, Sept. 15, and Jan. 17, 2023.
Tax Forms
- Form 1040-ES, Estimated Tax for Individuals
- Form 1120-W, Estimated Tax for Corporations
How to Pay
- Direct Pay from a bank account.
- Paying by credit or debit card or the Electronic Federal Tax Payment System.
- Mailing a check or money order to the IRS.
- Paying cash at a retail partner.
Anyone who pays too little tax through withholding, estimated tax payments, or a combination of the two may owe a penalty. In some cases, the penalty may apply if their estimated tax payments are late. The penalty may apply even if the taxpayer is due a refund.