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  • Writer's pictureMaria Alvarez

Estimated Tax Payments 2024: How They Work When to Pay

Making estimated tax payments can be important if you expect to owe a significant amount of tax at the end of the year and you don't have enough taxes withheld from your income through withholding from wages, pension, or other income.

Remember that if you do not pay enough taxes during the year the IRS and the State you live in (varies) will assess an underpayment penalty.

In the United States, income taxes are typically collected throughout the year through a system called withholding. When you work for an employer, they withhold a portion of your earnings from each paycheck and send it directly to the government to cover your federal and state income taxes, as well as other taxes like Social Security and Medicare.

Your employer determines the amount of withholding based on information you provide on your Form W-4, such as your filing status, number of dependents, and any additional withholding you request. The more allowances you claim on your W-4, the less tax will be withheld from your paycheck.

If you generate income that is doesn't pay taxes as you cash it in. 

  • This can include self-employment or freelancer earnings, or income you've earned on the side such as dividends, realized capital gains, prizes and other non wage earnings

  • W-2 workers whose tax liability is not fully covered by their withholdings may also need to pay estimated taxes.

Certain states may also require you to pay estimated taxes. Check your state tax department's website for details, as state deadlines and rules may differ from federal ones. 

When are they due??

Here's the estimated tax payment schedule based on the income periods you provided:

  • If you earned income during Jan. 1 – Mar. 31, 2024, your estimated tax payment deadline is April 15, 2024.

  • If you earned income during April 1 – May 31, 2024, your estimated tax payment deadline is June 17, 2024.

  • If you earned income during June 1 – Aug. 31, 2024, your estimated tax payment deadline is Sept. 16, 2024.

  • If you earned income during Sept. 1 - Dec. 31, 2024, your estimated tax payment deadline is Jan. 15, 2025.

These dates are when your estimated tax payments are due to the IRS for each respective income period. It's essential to mark these dates on your calendar and make sure you pay your estimated taxes on time to avoid penalties and interest.

You can't pay estimated taxes whenever you want. The IRS sets quarterly deadlines for their collection, and it's important to pay on time to avoid penalties. You have two options:

  1. Follow the IRS schedule and make four payments per year according to their deadlines.

  2. Pay more frequently in smaller increments, as long as you cover your tax liability for each quarter.

Either way, be sure to meet the deadlines to avoid underpayment penalties.

Who needs do pay?

According to the IRS guidelines, you may not need to make estimated tax payments if:

  • You're a U.S. citizen or resident alien who owed no taxes for the previous full tax year.

  • You likely won't owe taxes this year unless you have untaxed income.

However, here are some situations where you might need to make estimated tax payments:

  • 1099 workers: Independent contractors, freelancers, and individuals with side jobs who expect to owe $1,000 or more in taxes.

  • W-2 workers with insufficient withholding: If your employer isn't withholding enough from your paycheck to cover your tax bill.

  • Businesses: Corporations that anticipate owing at least $500 in taxes for the tax year.

  • Self-employed individuals: People who work for themselves and expect to owe $1,000 or more in taxes, as no taxes are automatically withheld from their income.

  • Landlords and investors: Individuals with rental income and investment earnings may need to make estimated quarterly tax payments, especially if taxes aren't automatically withheld from their regular paychecks.

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