Our federal income tax is a pay-as-you-go tax. You must pay tax as you earn or receive income during the year. There are two ways to pay as you go: withholding and estimated tax payments.
If you do not pay enough tax by the due date of each payment period, you may be charged a penalty even if you are due a refund when you file your return.
General Rule
In most cases, you must pay estimated tax if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and 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 (110% if your AGI is over $150,000 for MFJ).
When to Pay
For estimated tax purposes, the year is divided into four payment periods:
- April 15 (for Jan 1 – Mar 31)
- June 15 (for Apr 1 – May 31)
- September 15 (for Jun 1 – Aug 31)
- January 15 (for Sep 1 – Dec 31)
Exceptions
You do not have to pay estimated tax if you were a U.S. citizen or resident alien for all of the prior tax year and you had no tax liability for the full 12-month prior tax year.