Top Frequently Asked Questions for Estimated Tax

Is an S corporation required to pay quarterly estimated tax?

Answer:

Sometimes an S corporation must make estimated tax payments.

An S corporation must make installment payments of estimated tax if the total of these taxes is $500 or more:

  • Tax on built-in gains,
  • Excess net passive-income tax,
  • Investment credit recapture tax.

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How do partnerships file and pay quarterly estimated tax payments?

Answer:

  • Partnerships file Form 1065, U.S. Return of Partnership Income, to report income and expenses.
  • A partnership doesn't pay tax on its income, instead, it "passes through" any profits or losses to its partners. Generally, the partnership must prepare and give partners a copy of Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc.
  • The partners report the information from the K-1 on their own returns and pay any taxes due, including estimated taxes.

How Partners Pay Estimated Tax

Because partners aren't employees of the partnership, partnerships don't withhold tax from their distributions to pay the partners' income and self-employment taxes shown on their Forms 1040, U.S. Individual Income Tax Return. The partners may need to pay estimated tax payments using Form 1040-ES, Estimated Tax for Individuals.

As a partner, you can pay the estimated tax by:

See Payments for more information.

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Should self-employment taxes be paid quarterly or yearly?

Answer:

If you determine you need to make estimated tax payments, make quarterly estimated tax payments on estimated income tax including estimated self-employment tax.

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When are quarterly estimated tax payments due?

Answer:

For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you don't pay enough tax by the due date of each payment period, you may be charged a penalty even if you're due a refund when you file your income tax return at the end of the year.

If you mail your estimated tax payment and the date of the U.S. postmark is on or before the due date, the IRS will generally consider the payment to be on time. If you use IRS Direct Pay, you can make payments up to 8 p.m. Eastern time on the due date. If you use a credit or a debit card, you can make payments up to midnight on the due date.

When to Pay Estimated Tax

Payment Period Due Date
January 1 – March 31 April 15
April 1 – May 31 June 15
June 1 – August 31 September 15
September 1 – December 31 January 15* of the following year. *See January payment in Chapter 2 of Publication 505, Tax Withholding and Estimated Tax
Fiscal Year Taxpayers If your tax year doesn't begin on January 1, see the special rules for fiscal year taxpayers in Chapter 2 of Publication 505
Farmers and Fishermen See Chapter 2 of Publication 505

Note: If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that's not a Saturday, Sunday, or legal holiday.

 

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When I file my taxes at the end of the year, how do I report the estimated payments I made during the year?

Answer:

Take credit for all your estimated tax payments in the "Payments" section of Form 1040, U.S. Individual Income Tax Return, line 65 or Form 1040A, U.S. Individual Income Tax Return, line 41. Also include in that line any overpayment from your prior year tax return that you had credited to your estimated tax for the year you're reporting. You can't file Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, if you made estimated tax payments.

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

Answer:

You must make estimated tax payments for the current tax year if both of the following apply:

  • 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. (Your prior year tax return must cover all 12 months.)

There are special rules for:

  • Farmers and fishermen
  • Certain household employers
  • Certain higher income taxpayers
  • Nonresident aliens

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If I anticipate a sizable capital gain on the sale of an investment during the year, do I need to make a quarterly estimated tax payment during the tax year?

Answer:

You must make estimated tax payments for the current tax year if both of the following apply:

  • You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits, and
  • 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. (Your prior year’s tax return must cover all 12 months.)   

There are special rules for:

  • Farmers and fishermen
  • Certain household employers
  • Certain higher income taxpayers
  • Nonresident aliens

You may be able to annualize your income and make an estimated tax payment or an increased estimated tax payment for the quarter in which you realize the capital gain. You would have to file Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, with your tax return to show us that your uneven estimated payments match up with the income that you received unevenly over the course of the year.

If you're making estimated tax payments and have federal income tax withholding, you can increase your quarterly estimated tax payments or increase your federal income tax withholding to cover the tax liability. If you have the proper amount withheld, you may not need to make estimated tax payments and may not have to file Form 2210 with your tax return as you would if you only increased the remaining estimated tax payments.

Note: "Qualified Dividend and Capital Gains Worksheet," available in Publication 505, Tax Withholding and Estimated Tax, can help you estimate the additional tax liability. It's important to remember that the tax rate on net capital gains is generally lower than the tax rate on ordinary income.

 

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What is meant by "no tax liability" in the exceptions to the estimated tax penalty?

Answer:

You had no tax liability for the prior year if your total tax was zero or you didn't have to file an income tax return.

Your total tax was zero if the amount identified in one of the following three situations was zero:

  • Your total tax on Form 1040, U.S. Individual Income Tax Return, was the amount listed on the line labeled "total tax" taking in consideration certain reductions. See the section No Tax Liability Last Year in Chapter 4 of Publication 505, Tax Withholding and Estimated Tax, for these reductions.
  • On Form 1040A, U.S. Individual Income Tax Return, it was the amount listed on the line labeled "total tax" reduced by the shared responsibility payment, and any earned income credit, additional child tax credit, refundable American opportunity credit, and net premium tax credit.
  • On Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, it was the amount labeled "total tax" reduced by the earned income credit and shared responsibility payment, if applicable.

You didn't have to file an income tax return if the section titled Who Must File in Publication 501, Exemptions, Standard Deduction, and Filing Information, for the prior tax year shows that you had no filing requirement.

For this exception to apply, two additional requirements must be met:

  • Your prior tax year was a taxable year of 12 months.
  • You were a citizen or resident of the United States throughout your prior tax year.
     

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Are there any special provisions related to estimated tax payments for farmers and fishermen?

Answer:

Calendar year farmers and fishermen. If you're a calendar year taxpayer and at least two-thirds of your gross income for 2017 or 2018 is from farming or fishing, you have only one payment due date for your 2018 estimated tax, January 15, 2019. The due dates for the first three payment periods don't apply to you. See Farmers and Fishermen in Publication 505, Tax Withholding and Estimated Tax.

You can figure the penalty for failure to pay estimated taxes, which includes failing to pay enough estimated taxes, for 2018, on the difference between the amount of 2018 withholding plus estimated tax you paid by January 15, 2019, and the smaller of:

  1. 66 ⅔% (rather than 90%) of your 2018 tax, or
  2. 100% of the tax shown on your 2017 return.

You won't owe an estimated tax penalty if the tax shown on your 2018 return, minus your 2018 withholding, is less than $1,000.

If you're a calendar year taxpayer and you file your 2018 Form 1040 by March 1, 2019, you don't need to make an estimated tax payment if you pay all the tax you owe at that time. 

Fiscal year farmers and fishermen. If you're a farmer or fisherman, but your tax year doesn't start on January 1, you can either:

  • Pay all your estimated tax by the 15th day after the end of your tax year, or
  • File your return and pay all the tax you owe by the 1st day of the 3rd month after the end of your tax year.

Note: If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that's not a Saturday, Sunday, or legal holiday.

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Frequently Asked Question Subcategories for Estimated Tax