To calculate estimated taxes, individuals must estimate their total tax liability for the year, including self-employment tax and individual income tax. They then divide this amount by four to determine the quarterly payment amounts. The IRS provides Form 1040-ES for individuals and Form 1120-W for corporations to assist with these calculations. These forms include worksheets and payment vouchers to facilitate the process.
Deadlines for Estimated Tax Payments
Estimated tax payments are due quarterly, with the following specific deadlines:
- April 15 for the first quarter
- June 15 for the second quarter
- September 15 for the third quarter
- January 15 of the following year for the fourth quarter
Consequences of Underpayment
Failing to pay the required estimated taxes can result in interest and penalties on the unpaid amount. The threshold for these penalties varies based on the taxpayer’s adjusted gross income. Generally, if the total tax liability exceeds $1,000 for individuals or $500 for corporations, estimated tax payments are required.