Tuesday, April 15 is the deadline for filing your 2024 tax return. But another tax deadline is coming up the same day, and it’s essential for certain taxpayers. It’s the deadline for making the first quarterly estimated tax payment for 2025 if you’re required to make one.
You may have to make estimated tax payments for 2025 if you receive interest, dividends, alimony, self-employment income, capital gains, prizes, or other income. If you don’t pay enough tax through withholding and estimated payments during the year, you may be liable for a tax penalty on top of the tax that’s ultimately due.
Estimated tax payments help ensure that you don’t wind up owing one large lump sum — and possibly underpayment penalties — at tax time.
Individuals must pay 25% of their “required annual payment” by April 15, June 15, September 15, and January 15 of the following year to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due the next business day. For example, the second payment is due on June 16 this year because June 15 falls on a Sunday.
Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their tax returns are filed. The required annual payment for most individuals is the lower of 90% of the tax shown on the current year’s return or 100% of the tax shown on the return for the previous year. However, if the adjusted gross income on your tax return for the previous year was more than $150,000 ($75,000 if you’re married filing separately), you must pay the lower of 90% of the tax shown on the current year’s return or 110% of the tax shown on the return for the previous year.
Generally, people who receive most of their income in the form of wages satisfy these payment requirements through the tax withheld from their paychecks by their employers. Those who make estimated tax payments usually do so in four installments. After determining the required annual payment, they divide that number by four and make equal payments by the due dates.
Estimated payments can be made online, from your mobile device using the IRS2Go app, or by mail using Form 1040-ES.
Instead of making four equal payments, you may be able to use the annualized income method to make unequal payments. This method is useful to people whose income isn’t uniform over the year, for example, because they’re involved in a seasonal business.
These are the general rules. The requirements are different for those in the farming and fishing industries. Contact us if you have questions about estimated tax payments. In addition to federal estimated tax payments, many states have their own estimated tax requirements. We can help you stay on top of your tax obligations so you aren’t liable for penalties.
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