When Are Quarterly Taxes Due?
People who work for companies have estimated taxes withheld from their paychecks, but independent contractors, business owners, and those who live on investment income are required to proactively pay estimated taxes on a quarterly basis.
Payments are typically made incrementally, on the following quarterly tax dates:
|Due Dates for Estimated Taxes|
|Payment Period||Due Date|
|Jan. 1 to March 31||April 15|
|April 1 to May 31||June 15|
|June 1 to Aug. 31||Sept. 15|
|Sept. 1 to Dec. 31||Jan. 15 of the following year|
If a due date falls on a weekend or legal holiday, then payments must be issued on the next business day.
For 2021 taxes, this is only the case for the fourth payment, as Jan. 15, 2022, falls on a Saturday. Since Jan. 17, 2022, is Martin Luther King Day, the fourth payment deadline gets booted to Jan. 18, 2022.
- Business owners and self-employed people are required to proactively pay estimated income taxes on a quarterly basis.
- Anyone with income above $1,000 a year is required to file quarterly (unless their taxes are automatically deducted by an employer).
- The payment deadlines are usually April 15, June 15, Sept. 15, and Jan. 15 of the following year, with occasional adjustments to the next business day for holidays.
IRS Disaster Relief Measures
Residents and business owners in Louisiana and parts of Mississippi, New York, and New Jersey were granted extensions on their deadlines for filings and payments to the IRS due to Hurricane Ida. Due to the tornado in December 2021, taxpayers in parts of Kentucky were also granted extensions. You can consult IRS disaster relief announcements to determine your eligibility.
Understanding Quarterly Tax Filings
Anyone who projects their 2021 tax bill to be under $1,000, after taking into account any withholding and refundable tax credits such as earned income credits and premium tax credits, doesn't need to bother with estimated taxes.
Others need to do one of the following:
- Pay estimated taxes to avoid or minimize penalties. This applies to self-employed people, small business owners, and anyone else who receives income that has not had taxes withheld from it.
- Increase withholding to cover projected taxes. This applies to people who receive most of their income from an employer who deducts taxes from their paychecks. If you still owe money at tax time (or you get a lot of money back), you made an error on your W-4.
Employed people should increase their tax withholding by filing a new Form W-4 with their employers. Those receiving pension or annuity income should file Form W-4P with the plan administrators or other parties who pay out the benefits.
Individuals may opt for voluntary withholding on payments such as Social Security benefits and unemployment benefits by filing Form W-4V.
If you have income from an employer and independent contractor income or investment income, then you can increase the amount of your withholding from your paycheck in lieu of paying estimated quarterly taxes.
What’s New for 2021 Taxes
When using 2020’s tax bill to project 2021’s liability, take the following adjustments into account:
- Changes in Circumstances: Will a marriage or divorce change your filing status and the associated tax rates? Are you expecting a child who will result in a child tax credit? Will a new home purchase entitle you to more deductions for mortgage interest and real estate taxes?
- Inflation Adjustments: Dozens of tax breaks are adjusted annually for inflation, such as the IRS standard mileage rates. These may result in less tax liability, even if your income remained consistent from 2020 to 2021.
- New Tax Rules: The 2017 Tax Cuts and Jobs Act (TCJA) significantly altered the tax rules and will have the following continued effects through 2025:
- The standard deduction has essentially been doubled.
- The personal exemption is no more.
- Significant personal income tax bracket changes gave taxpayers at both ends of the spectrum a big tax cut, with smaller cuts for those in between.
- Many miscellaneous deductions were jettisoned, including expenses related to job relocation (except for active-duty military who relocate due to a military order).
- 2021 American Rescue Plan Changes: As part of the third stimulus package, the American Rescue Plan Act that was signed into law on March 11, 2021, the 2021 tax year will see key changes:
- The maximum earned income credit (EIC) for 2021 will be $1,502, previously capped at $543 for childless households. The law also expands eligibility for childless households.
- For unemployment income received in 2020, up to $10,200 for individuals and $20,400 for married couples filing jointly is made tax-free at the federal level as long as your adjusted gross income doesn’t exceed $150,000. If you filed your tax return early, then the IRS will adjust it automatically. That may not be the case for your state, so be sure to review your state return. To see if your state conforms to these rules, check this list.
- The Affordable Care Act (ACA) Premium Tax Credit expands the credit offered to those purchasing insurance via the Health Insurance Marketplace.
- Child and dependent care tax credit changes have been made for 2021. The credit, originally capped at 35% of eligible expenses up to $2,100, is now capped at 50% of eligible expenses up to $4,000 for one qualifying individual and $8,000 for two or more qualifying individuals. The law also makes the credit entirely refundable.
- The child tax credit is fully refundable, and the caps move up to $3,000 for children from 6 to 17 years old and $3,600 for those under age 6.
Note that the investment income limit for 2021 has been raised from $3,650 or less to $10,000 or less. This $10,000 figure will be pegged to inflation and adjusted accordingly every year going forward. This is a permanent change as part of the American Rescue Plan Act.
The Bottom Line
While estimating taxes isn’t an exact science, coming close to the correct amount will help people avoid penalties if they’re mindful of the quarterly deadlines.
Remember, consult a tax professional when questions arise about difficult issues.