What Are ES Payments to the IRS?
The Internal Revenue Service expects all taxpayers to pay tax as they earn income. This is known as a "pay as you go" tax system. Taxpayers who earn wages are expected to have tax withheld from their payroll checks while independent contractors are expected to make quarterly estimated tax payments, also called 1040-ES payments.
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Significance
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Estimated tax payments are due on April 15, June 15, September 15 and January 15 of each year. The payments should be equal and cover at least 90 percent of the taxpayer's tax liability.
Calculation
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Use the estimated tax worksheet on page 7 of the 1040-ES Instructions to determine the amount of estimated tax you owe (see Resources).
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Process
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Estimated tax can be paid online at EFTPS.gov or payments can be mailed to your local IRS service center. If you mail your payment, be sure to also include IRS Form 1040-ES.
Exceptions
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Taxpayers who earned money as a self-employed person but had no tax liability are not required to pay estimated taxes. You can determine if you had a tax liability by referring to the filing requirements in IRS Publication 501. In addition, there are also special rules for farmers and fishermen.
Warning
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Failure to make estimated tax payments can result in an underpayment of estimated tax penalty. Use IRS Form 2210 to determine if you owe an estimated tax penalty (see Resources).
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