IRS Estimated Taxes
The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making payments for estimated taxes.
If you do not pay your tax or you pay an insufficient amount of tax through withholding, you might also have to pay estimated taxes.
The Internal Revenue Service (IRS) requires that you make quarterly payments for estimated taxes for calendar year 2016 if both of the following apply:
- You expect to owe at least $1,000 in federal tax for 2016, after subtracting federal tax withholding and credits, and
- You expect federal withholding and credits to be less than the smaller of:
- 90% of the tax to be shown on your tax year 2016 federal tax return, or
- 100% of the tax shown on your tax year 2015 federal tax return (only applies if your 2015 tax return covered 12 months – otherwise refer to the 90% rule above only).
Please note: These percentages may be different if you are a farmer, fisherman, or higher income taxpayer.
You do not have to pay estimated tax for the current year if you meet all three of the following conditions.
- You had no tax liability for the prior year,
- You were a U.S. citizen or resident for the whole year and
- Your prior tax year covered a 12 month period.
How To Calculate The amount Federal Quarterly Estimated Tax Payments
To calculate your federal quarterly estimated taxes, you must estimate your adjusted gross income, taxable income, taxes, deductions, and credits for the calendar year 2016. When figuring your estimated tax for the current year, it may be helpful to use your income, deductions, and credits for the prior year as a starting point. Use your prior year’s federal tax return as a guide.
The Form 1040-ES includes an Estimated Tax Worksheet to help you calculate your federal estimated tax payments based on the income you expect to earn for the year. You want to estimate your income as accurately as you can to avoid penalties. You must make adjustments both for changes in your own situation and for recent changes in the tax law during the course of the year.
Deadline Dates For Estimated Tax Payments
For estimated tax purposes, the year is divided into four payment periods. Each period has 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.
Below is a table that lists the filing due dates for quarterly estimated tax payments for each of these payment periods:
|January 1 – March 31, 2016
|April 18, 2016
|April 1 – May 31, 2016
|June 15, 2016
|June 1 – August 31, 2016
|September 15, 2016
|September 1 – December 31, 2016
|January 15, 2017
*You do not have to make the payment due on January 15, 2017, if you file your 2016 tax return by February 1, 2017 and pay the entire balance due with your return.
How To Make Estimated Tax Payments
There are a variety of options for making quarterly estimated tax payments:
- You can credit an overpayment on your 2015 tax return to your 2016 estimated tax,
- You can mail your payment with a payment voucher form (Form 1040-ES),
- You may pay by phone or electronically using the Electronic Federal Tax Payment System (EFTPS) , or
- You can Pay Online on the IRS website .
Penalties For Estimated Taxes
Generally, if you do not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax.
If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. To do this, file a new Form W-4 with your employer. There is a special line on Form W-4 for you to enter the additional amount you want your employer to withhold.
At Tax Samaritan, we make it easy for you to figure out if you have to pay estimated taxes and if so, how much. In fact, we do all that and prepare your quarterly estimated taxes vouchers at no additional cost – it’s included complimentary as part of all tax engagements.
Our goal at Tax Samaritan is to provide the best counsel, advocacy and personal service for our clients. We are not only tax preparation and representation experts, but strive to become valued business partners. Tax Samaritan is committed to understanding our client’s unique needs; every tax situation is different and requires a personal approach in providing realistic and effective solutions.
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Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.