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Estimated Tax Payments | FAQ

Updated: Jun 6

What are Estimated Tax Payments?

Estimated Tax Payments are the estimated taxes that small business owners and self-employed individuals must pay and report to the IRS, typically every quarter. These payments account for Social Security, Medicare, and federal income taxes that are usually withheld by an employer for regular employees.


Who Needs to Pay Estimated Tax Payments?

Estimated tax payments are required for individuals who do not have taxes withheld through an employer and/or expect to owe at least $1,000 at the end of the year. This typically includes small business owners, self-employed individuals, such as freelancers and independent contractors, investors, and landlords.


How Much Do I Need to Pay?

You can use the IRS Form 1040-ES, Estimated Tax for Individuals or Form 1120-W, Estimated Tax for Corporations to determine if you are required to pay estimated taxes, and how much you will need to pay. There are two taxes that you need to take into consideration when estimating your quarterly tax payment:


  1. Self-employment tax: This tax accounts for your share of Medicare and Social Security. Since you don’t have an employer who takes these taxes out of your paycheck, you must include them in your estimated tax payments. Currently, the self-employment tax rate is 15.3% (12.4% for Social Security and 2.9% for Medicare)

  2. Income tax: This tax is based on your income tax rate, which can be found on the IRS website.


If you’re making more or less than expected throughout the year, you may need to adjust your estimated tax payments. Estimated taxes are usually paid in four equal payments throughout the year. For individuals with jobs where income fluctuates seasonally, using the annual income installment method can help determine tax payments that better match your income.


When are Estimated Tax Payments Due?

Estimated tax payments are due every quarter, although individuals can choose to pay them at any time before the deadline. For the 2024 tax year, estimated tax payments are due by the following dates:


  • First Payment for Q1 is due April 15, 2024

  • Second Payment for Q2 is due June 17, 2024

  • Third Payment for Q3 is due September 16, 2024

  • Fourth Payment for Q4 is due January 15, 2025


If you file your federal individual tax return by January 31, you can pay the entire balance of your unpaid tax with your tax return instead of the mid-January deadline.


How Do I Pay Estimated Tax Payments?

Tax payments go to the IRS and you have a few options for how to pay:


  1. Pay Online: Set up an account with the IRS to pay with your bank account (Direct Pay), credit card, debit card, or enroll in the Electronic Federal Tax Payment Service (EFTPS).

  2. Pay by Phone: If you enroll in the EFTPS, you can pay through their voice response system.

  3. Pay by App: IRS2Go is the official mobile app of the IRS that allows you to use IRS Direct Pay to pay taxes directly from your bank account.

  4. Pay in Person: Visit your local IRS office to pay by cash or check.

  5. Pay by Mail:  Mail your tax payments to the IRS with a check or money order. The mailing address is based on which state you live in. Go to IRS Form 1040-ES under “Where To File Your Estimated Tax Payment Voucher if Paying by Check or Money Order” to find the correct address to mail your payment. The date of the U.S. postmark is considered the date of the payment.


What Happens If You're Late or Underpay?

Penalties for late payments are calculated by multiplying the number of days the payment is late by the interest rate for that period. Underpayment of estimated taxes may also be penalized. Generally, you can avoid a penalty for underpayment if you pay at least 90% of the taxes owed for the current year or make payments equal to 100% of the prior year's taxes shown on your return. 


Final Notes

These are estimated tax payments and you need to file a tax return to determine your actual tax payment. You may find that you were overpaying your taxes and get a refund, or you may have underpaid and need to make an additional payment. 


There are a lot of variables that go into making estimated tax payments. We advise you to meet with your accountant or bookkeeper to ensure that your payments are accurate.


Additional Resources:

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