If you have taxable income from sources such as investments, self-employment, or pass-through entities, you may need to make estimated tax payments throughout the year.

If you work for an employer, you’re familiar with the federal and state withholding that’s deducted from each of your paychecks. But if you have income from other sources, such as your side hustle, investment interest, dividends, capital gains, alimony, or even prizes and awards, taxes may not be automatically withheld. That can mean having to pay an unexpected bill at tax time–and nobody wants that!

How do I know if I have to make quarterly individual estimated tax payments?

Generally, you must make estimated tax payments for the current tax year if both of the following items apply to your situation:

You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits.

You expect your withholding and refundable credits to be less than the smaller of:
- 90% of the tax to be shown on your current year’s tax return, or
- 100% of the tax shown on your prior year’s tax return or 110% of the tax shown on your prior year’s tax return if your AGI for that year was greater than $150,000 ($75,000 if married filing separately). Your prior year tax return must cover all 12 months.

There are special rules for individuals with income from farming and fishing, certain household employers, certain higher income taxpayers, taxpayers whose prior tax return covered less than 12 months, and nonresident aliens.

If you’re a Kindred tax client, we calculate the amount of estimated tax you owe. If you prepare your own taxes, you can use Form 1040-ES to figure your estimated tax.

Estimated tax payments are due four times each year:

January 1 to March 31 – due April 15 (Tax Day!)
April 1 to May 31 – due June 15
June 1 to August 31 – due September 15
September 1 to December 31 – due January 15 of the following year

If the due date falls on a Saturday, Sunday, or legal holiday, payments are due the next business day.

If you don’t pay enough tax through withholding and estimated tax payments, you may have to pay a penalty. You may also have to pay a penalty if your estimated tax payments are late, even if you’re due for a refund when you actually file your tax return.

And–depending on how your tax situation came out this year–it might be worthwhile to review your tax withholding from your employer. You can use the IRS Tax Withholding Estimator to make sure you’re having an appropriate amount withheld.