Today I am going to talk about estimated payments. What are estimated payments? Estimated payments are tax payments made quarterly to the IRS in attempt to get the tax owed as close to 0 as possible on an individual tax return, form 1040. This is the same type of tax as people who are wage earners and have tax automatically withheld from their paycheck by their employer. Therefore, people who need to make estimated payments are people who are self-employed, and do not have withholding from their pay. Also, people who have other sources of taxable income of which no tax is withheld, such as unearned income from investments, may also need to be paying in estimated payments depending on the amount of the income. Lastly, wage earners who are not having enough withheld from their pay should also be making quarterly estimated payments.
Not only are certain individuals required to make estimated payments, some businesses are required to as well. Generally, those businesses are entities with a tax structure where taxable income stays within the company, such as a C Corporation. If your business files a form 1120 at the end of the year, you are a C Corporation and you need to be sending in estimated payments each quarter.
Estimated tax payments have the following deadlines:
1st quarter: by April 15th
2nd quarter: by June 15th,
3rd quarter: by September 15th,
4th quarter: by January 15th
If you should be paying in estimated payments, mark your calendar for the above deadlines. You may notice that even though they are called "quarterly payments," they are not exactly 3 months apart each time. See my blog for more on Estimated Payments and how they affect tax problems.