Businesses and individuals with income not subject to withholdings generally must make estimated income tax payments throughout the year. For example, self-employed individuals and winners of large prizes. Additionally, estates and trusts are usually subject to paying estimated taxes.
No Holding Back
Assuming no withholdings are made, individuals expecting to owe more than $1,000 in income tax for the year when filing their return are expected to make estimated tax payments. Similarly, corporations generally must make estimated tax payments if they are expecting to owe more than $500 in a year when filing their return. Estimated taxes are calculated on the current regulations governing federal income tax using Form 1040-ES.
Period Payments
Estimated tax payments are divided into 4 periodic payments throughout the year. Payments are due 15 days following the end of each period.
| Period | Payment due date |
| Jan 1 – March 31 | April 15 |
| April 1 – May 31 | June 15 |
| June 1 – Aug 31 | Sept 15 |
| Sept 1 – Dec 31 | Jan 15 (of the following year) |
If the due date falls on a weekend or holiday, payments will be considered timely if it is made by the following business day that isn’t a weekend or holiday, e.g. April 18th for 2023. These estimated payments may be done either through mail or electronically, such as through the Electronic Federal Tax Payment System (EFTPS).
Penalty Pinching
Missing any of the timely payments will incur penalties. Additionally, underpayment of estimated taxes at any point in the tax year will incur an additional penalty cost on top of the already-due estimated tax.
However, these penalties may be avoided if you owe less than $1,000 in tax minus withholdings and credits OR if you paid at least 90% of the current year tax or 100% of the prior year’s tax, whichever is smaller.
Managing timely estimated payments can be cumbersome for businesses and owners focused simply on growing their budding business. Having the support of proper “back-office” staff can help with those day-to-day accounting and tax concerns. MiklosCPA helps many small and emerging firms with their accounting and tax needs, such as making their timely estimated tax payments. Curious how we can help you and your business? Let’s chat. Also, like, share ,and subscribe to our social media pages for more useful tax tidbits like this and other interesting articles for small business owners.