If you are a business owner, a retiree, a spouse, or a gig worker, you should make your IRS estimated tax payment, with filing due by September 16.
What is an estimated tax payment?
Estimated tax payment is not a new form of payment made by taxpayers who are either partners, work in the gig economy, retirees, or business owners. An estimated tax payment is a tax payment on income done when no tax or enough tax is withheld. It effectively ensures the IRS continues to have a flow of income through the year from these economic activities rather than waiting to receive all the taxes when the year’s final tax return is filed.
Who is expected to make estimated tax payments?
The estimated tax is not a payment that the IRS expects everyone to pay, as there are conditions to be met before the payment is done. You must make estimated tax payments if you belong to any of the categories below:
- As stated earlier, individuals who are gig workers, partners, retirees, and S corporation shareholders will be required to make an estimated tax payment if they will be owing at least $1000 by the time their tax returns are filed.
- Also, you must pay an estimated tax if the tax filed in the current year amounts to more than zero.
- As a corporation, if you expect to owe more than $500 by the time your tax is filed,
Who is not expected to pay an estimated tax?
While the IRS has made an exception for people who have their businesses affected by disasters in 17 states in the US, there are also categories of people who are not expected to make estimated tax payments. Apart from these persons, you can also be exempted from paying estimated taxes when:
- As an employee, you ask your employer to withhold even more tax from your earnings by filing a new Form W-4 with them. You can specify the amount you want your employer to hold using this method.
- You also do not have to pay an estimated tax if you can prove that you had no tax liability in the year before and your total tax was zero.
Also for the current year, you don’t have to pay an estimated tax if you meet three conditions specified by the IRS:
- The first condition is that you had no tax liability for the previous year.
- The second condition is that you were a US citizen or a resident for those last 12 months.
- The tax you paid beforehand covered an entire year.
How to pay the estimated tax
You can make your estimated tax payments by using the IRS website, as there are various options, including payment by forms or mail, that can help you seamlessly make your payments to avoid a penalty for late payments.
