Home Technology If you have an incidental condition, your estimated taxes are due today

If you have an incidental condition, your estimated taxes are due today

This story is part of Taxes 2022CNET’s coverage of the best tax software and everything else you need to file your return quickly, accurately, and on time.

What is going on

Since self-employed workers and freelancers have not withheld taxes from their paychecks, they must pay estimated tax payments.

Why it matters

It’s important to pay quarterly estimated taxes to avoid tax penalties — and a huge tax bill — when filing your tax return.

What’s next

The next estimated tax due date is June 15, 2022.

When you have a traditional hourly or salaried job, your employer withholds income tax from your paycheck. But if you are one of the millions of small business owners, freelancers, side jobs and other self-employed taxpayers, there is no automatic mechanism for withholding your taxes. However, that doesn’t mean you don’t owe them anything when tax season rolls around.

Anyone who earns income that is not taxed is estimated to pay taxes four times a year. Making estimated tax payments will not only minimize your financial burden on tax day, but also help you avoid IRS penalties.

The estimated tax return process can be a little complicated, but we can make it simple. Here’s everything you need to know to calculate and file your taxes on time.

What are Estimated Taxes?

If you earn or receive income that is not subject to federal withholding tax throughout the year — sideline income or income from a rental home, for example — you pay with estimated taxes at your discretion. The estimated tax is a quarterly payment based on your income for the period. Essentially, the estimated tax allows you to prepay a portion of your income tax every few months to avoid paying a lump sum on tax day.

Who Should Pay Estimated Taxes?

If you’ve completed the IRS W-4 form, which instructs your employer about how much to withhold from each paycheck, you may not be required to pay estimated taxes. However, if you’re not a W-4 salaried employee, you should probably keep estimated tax payments on your radar. According to the IRS, you generally need to make estimated tax payments if you expect to pay taxes of $1,000 or more when your return is filed, and if your employment falls into one of these categories:

  • Self-employed or freelancer
  • proprietorship
  • Partner
  • S corporation shareholder

There are other sources of income that fall under the estimated tax umbrella, including:

  • Dividends and interest earned from the sale of investments
  • Royalties for previous work
  • Rental income landlord
  • Alimony
  • Unemployment benefits
  • Pension benefits
  • Social Security benefits, if you have other sources of income
  • Awards and honors

As a full-time employee, you may also have to pay estimated taxes if your employer doesn’t withhold enough from your paycheck. To update your W-4 with the correct withholding amount, use the IRS Tax WIthholding Estimator tool, complete a new W-4 Employee Withholding Tax Withholding Form, and submit it to your employer.

Estimated taxes are due whether you are paid via direct deposit, check or digital payment services such as PayPal, CashApp, Zelle or Venmo† Note: while you should already paying taxes on that income, a new rule under the US bailout requires third-party payment networks to report $600 or more of payments to the IRS.

When are the estimated taxes due?

Estimated taxes are paid quarterly, usually on April 15, June, September, and January of the following year. A notable exception is when the 15th falls on a public holiday or weekend. In that case, you must submit your declaration no later than the next working day.

The deadlines for 2022 estimated taxes are in the table below.

Estimated Tax Installments

Earning Period

taxes due

1 Sept. until 31 Dec. 2021

January 18, 2022

January 1 to March 31, 2022

Apr 18, 2022

April 1 to May 31, 2022

June 15, 2022

June 1 to Aug 31, 2022

September 15, 2022

September 1 to December 31, 2022

January 16, 2023

How do I calculate estimated tax payments?

There are a few ways to calculate your quarterly tax payments, depending on your business model and annual income.

  • If you earn a steady income, estimate the tax you owe for the year and send a quarter to the IRS each quarter. For example, let’s say you make $80,000, which puts you in the 22% marginal tax bracket. You owe $17,600 in federal taxes or $4,400 per quarter in 2022.
  • If your income varies during the year, you can estimate your tax burden based on your income and deductions in the previous quarter. The IRS Estimated Tax Worksheet can help you do the math.

If you overestimated your earnings at the end of the year, you can fill out a 1040-ES form to receive a refund or apply your overpayment to future quarterly taxes. If you have underpaid, the form can help you calculate what you still owe.

How do I pay my estimated taxes?

When filing your estimated taxes, use the 1040-ES IRS tax form or the 1120-W form if you are filing as a corporation. You can fill out the form manually using the worksheets provided, or you can rely on your favorite tax software or tax advisor to walk you through the process and get the job done. From there, you can pay your federal taxes by mail or online through the IRS website. You’ll also find a full list of accepted payment methods and options, including installment plans.

Do I also have to pay estimated state taxes?

It depends. If you live in one of the few states of the US with no income tax, your responsibility ends with the estimated federal taxes we discussed. However, if your state levies income taxes, you will make estimated tax payments by the same federal tax deadlines. Visit the website of your state’s tax authorities or consult your tax advisor or tax software service for more personalized information.

What are the penalties if I don’t pay my estimated taxes?

It’s a good idea to post a calendar reminder as the quarterly deadline approaches to avoid paying a late penalty. You can be fined if:

  • If you owe more than $1,000 in taxes after deductions and credits.
  • If you paid less than 90% of tax for the current year through estimated taxes.

In some situations, the fine may be waived. To learn more about estimated tax penalties and terms of a waiver, see the instructions in IRS Form 2210.

Can I avoid paying estimated taxes?

Probably not without incurring those fines. Some classes of workers — especially those whose income exceptionally modest, inconsistent, or seasonal — are exempt from making quarterly payments to Uncle Sam, but:

  • If your net income for the quarter was $400 or less, you don’t have to pay estimated taxes — but you still need to file a tax return even if no taxes are due.
  • If you were a US citizen or resident for the entire past year, your total tax would be zero and you did not have to file an income tax return.
  • If your income fluctuates drastically throughout the year (for example, if you run a seasonal business), you may be able to reduce or eliminate your estimated tax payments with an annualized income payment method. Refer to the IRS Worksheet 2-7 to see if you qualify.
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