How to Make Estimated Tax Payments to the IRS
Self-employed taxpayers must pay the IRS estimated taxes on income earned from a trade or business as a sole proprietor, from membership in a partnership or limited liability company that engages in a trade or business, or from income earned in a business managed by the taxpayer. The IRS requires estimated taxes to pay for income taxes and self-employment taxes.
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Instructions
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Determine whether you must pay estimated taxes. A self-employed taxpayer does not have to pay estimated taxes if the taxpayer did not owe taxes in the previous year, the taxpayer is a U.S. citizen or was a resident for the entire year, and the taxpayer's return in the previous year covered 12 months.
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Calculate estimated taxes by using Form 1040-ES. Use the previous year's tax return to estimate current tax liability. The tax payment should be equal to at least 90 percent of the taxes owed for the current year or 100 percent of the taxes owed for the previous year.
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Pay estimated taxes by the due date. The IRS divides estimated tax payments into four installments. Estimated taxes are due on April 15 for income earned from January 1 to March 31; June 15 for income earned from April 1 to May 31; Sept. 15 for income earned from June 1 to Aug. 31; and Jan. 15 of the following year for income earned from Sept. 1 to Dec. 31.
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Pay estimated taxes. A taxpayer can make a payment by mailing the payment and Form 1040-ES to the IRS, by using electronic funds transfer if filing a tax return electronically, by making a payment through the Electronic Federal Tax Payment System (EFTPS), or by paying with a credit card over the phone or through the Internet.
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Tips & Warnings
Individuals must make estimated tax payments if they will owe $1,000 or more for the taxable year.
A corporation must make estimated tax payments if it will owe $500 or more for the taxable year.
A taxpayer is not required to make estimated tax payments until the taxpayer earns income.
The IRS can assess a penalty on a taxpayer who fails to pay estimated taxes by the due date or underpays taxes in an installment period. The penalty ranges from 6 to 8 percent. The IRS assesses the penalty for each day the tax remains unpaid.
