Estimated tax payments can be confusing, but they don’t have to be. Understanding the basics of estimated taxes and what you need to pay is key to making sure you stay in compliance with the IRS. Keeping up with estimated taxes throughout the year will help you avoid paying too much (or too little) come tax day. In this article, we’ll discuss when estimated taxes are due as well as how much you’re required to pay.
What are estimated tax payments?
Estimated tax payments are periodic payments made to the government by individuals or businesses during the year, in order to pay their expected tax liability. These payments are typically made quarterly in four equal installments and are estimated based on an individual’s or business’s expected income not subject to federal tax withholding minus deductions for the current year. The purpose of estimated tax payments is to ensure that the tax owed is paid in a timely manner, rather than as a lump sum at the end of the year, avoiding underpayment penalties.
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