Taxpayers must generally pay either 90% of current year taxes or 100% of prior year taxes (110% if AGI is over $150K) throughout the current tax year.
To meet this requirement, estimated tax payments will be required if you have income other than from wages on which you expect to owe $1,000 or more of income tax. Other income that is not subject to withholdings includes:
- Interest Income
- Gains from stock sales or other assets
- Self-employment income from a business
Estimated taxes should be paid during the year as you earn or receive income by making quarterly estimated tax payments. Estimated tax payment due dates are April 15, June 15, September 15, and January 15. IRS Form 1040-ES is used to figure your estimated tax.
Payments can be mailed in, done online by using the Electronic Federal Tax Payment System (EFTPS), or made by phone.
Tax planning during the year and making timely estimated tax payments will help prevent an unexpected year-end tax bill and save you potential underpayment penalties.