Tax Read Time: 3 min

You May Need to Make Estimated Tax Payments If…

You may have to make estimated tax payments if you earn income that is not subject to withholding, such as income from self-employment, interest, dividends, alimony, rent, realized investment gains, prizes, and awards.

You also may have to pay estimated taxes if your income tax withholding on salary, pension, or other income is not enough, or if you had a tax liability for the prior year. Please consult a professional with tax expertise regarding your individual situation.1

How to Pay Estimated Taxes

If you are filing as a sole proprietor, a partner, an S corporation shareholder, and/or a self-employed individual and expect to owe taxes of $1,000 or more when you file a return, you should use Form 1040-ES, Estimated Tax for Individuals, to calculate and pay your estimated tax. You may pay estimated taxes either online, by phone, or through the mail.2

How to Figure Estimated Tax

To calculate your estimated tax, you must include your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. Consider using your prior year's federal tax return as a guide.

When to Pay Estimated Taxes

For estimated tax purposes, the year is divided into four payment periods, each with a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty, even if you are due a refund when you file your income tax return.

Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in taxes after subtracting their withholdings and credits. They may also avoid the penalty if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.2

1. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.
2. IRS.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Free Retirement Guide

It's never too soon to start preparing for retirement. But do you know what to look out for? Download our free ebook, "Retire Happy: A Simple Guide to Your Next Big Adventure."



Thank you! Oops!
 

Related Content

The Cost of Medical Care

The Cost of Medical Care

Learn about the risks of not having health insurance in this informative article.

Estate Management 101

Estate Management 101

A will may be only one of the documents you need—and one factor to consider—when it comes to managing your estate.

Inflation & Your Money

Inflation & Your Money

It's important to understand how inflation is reported and how it can affect investments.

 

Have A Question About This Topic?







Thank you! Oops!

The Anatomy of an Index

The S&P 500 represents a large portion of the value of the U.S. equity market, it may be worth understanding.

Do Your Kids Know The Value of a Silver Spoon?

You taught them how to read and how to ride a bike, but have you taught your children how to manage money?

Immediate vs. Deferred Annuities

Looking forward to retirement? It's critical to understand the difference between immediate and deferred annuities.

View all articles

Can I Refinance My Mortgage?

This calculator can help determine whether it makes sense to refinance your mortgage.

Comparing Mortgage Terms

Estimate the total cost in today's dollars of various mortgage alternatives.

Self-Employed Retirement Plans

Estimate the maximum contribution amount for a Self-Employed 401(k), SIMPLE IRA, or SEP.

View all calculators

Your Cash Flow Statement

A presentation about managing money: using it, saving it, and even getting credit.

Managing Your Lifestyle

Using smart management to get more of what you want and free up assets to invest.

Protecting Those Who Matter Most

The importance of life insurance, how it works, and how much coverage you need.

View all presentations

Consider These 3 Things Before Driving Off the Lot

There are a few things to consider when buying or leasing your next vehicle.

When Markets React

When markets shift, experienced investors stick to their strategy.

Retirement Accounts When You Change Your Job

This video discusses issues related to your retirement accounts when you move on from your job.

View all videos