What are Quarterly Estimated Taxes?

In a perfect world, the taxes taken out of your wages would cover your tax liability, and you would never owe more. This is not the case for most taxpayers. We’re left to wonder what changed when we received a refund in past years. To meet your tax obligations, you have to calculate and pay quarterly estimated taxes.

Taxpayer’s Responsibility

We make payments four times a year at the end of each quarter. Payments made during the quarter will count towards the payment. There’s no benefit to paying ahead, but a day late will apply your payment to the following quarter.

Risk of Not Paying Quarterly Estimated Taxes

Paying estimated taxes helps you avoid penalties. This keeps you in good standing with your tax obligations. Penalties are calculated using federal interest rates for the quarter ending. When federal interest rates are low, the penalties are low and when rates are high, the penalties are high.

Your Options

There are many options for making tax payments.

• Mail vouchers with checks to the IRS.
• Pay online. When paying online, select “Estimated Tax” as your reason for payment.
• Set up an online account and schedule future payments. You can also access your entire history of payments.

Other Times to Consider Paying Quarterly Estimated Taxes

Think about making an estimated tax payment when your finances change.

• Selling appreciated stock
• Selling a home
• Gambling winnings and prize awards
• Receiving stock options
• Sale of a business
• Retirement plan conversions

Do You Need Help with Quarterly Estimated Taxes?

We can help you calculate your quarterly or one-time estimates. We’ll also automate email reminders ahead of the deadlines, so you won’t miss a payment. Get in touch today.