People who work for companies have estimated taxes withheld from their paychecks, but the self-employed, business owners, and those who live on investment income are required to proactively pay estimated taxes on a quarterly basis.
In the United States, income taxes are pay-as-you-go. If you don't keep up with payments, you could potentially end up with a large tax bill, in addition to penalties for late payment, when it comes time to file your return.
- Business owners and self-employed people are required to proactively pay estimated income taxes on a quarterly basis.
- In general, anyone who expects to owe $1,000 or more is required to pay quarterly estimates (unless their taxes are automatically deducted by an employer).
- Estimated tax 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.
When Are 2022 Estimated Tax Payments Due?
Estimated tax payments are typically made incrementally, on quarterly tax dates: April 15, June 15, September 15, and January 15 of the following year, unless a due date falls on a weekend or legal holiday.Here are the dates for 2022:
|2022 Due Dates for Estimated Taxes|
|Payment Period||Due Date|
|Jan. 1 to March 31||April 18, 2022|
|April 1 to May 31||June 15, 2022|
|June 1 to Aug. 31||Sept. 15, 2022|
|Sept. 1 to Dec. 31||Jan. 17, 2023|
While the first quarter is the first three calendar months of the year, the second "quarter" is only two months long (April 1 to May 31). The third quarter is the next three months (June 1 to Aug. 31), and the fourth quarter covers the final four months of the year.
If a due date falls on a weekend or legal holiday, then payments are due on the next business day. In 2022, for example, the deadline to pay first quarter estimated taxes is Monday, April 18 due to the Emancipation Day holiday in Washington, D.C., which falls on Friday, April 15. (By law, Washington, D.C., holidays affect federal tax deadlines.)
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 tornadoes in December 2021, taxpayers in parts of Kentucky were also granted extensions. So were residents impacted by the Colorado wildfires that same month. You can consult IRS disaster relief announcements to determine your eligibility.
Who Pays Estimated Taxes
Anyone who projects their 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. Self-employed people, small business owners, and anyone else who receives income that has not had taxes withheld from it needs to pay estimated taxes to avoid or minimize penalties for late payment.
If you receive pension or annuity income you can ease the burden of estimated taxes by filing Form W-4P with the plan administrators or other parties who pay out the benefits to have tax withheld. You can also opt for voluntary withholding on payments such as Social Security benefits and unemployment benefits by filing Form W-4V.
What’s New for 2022 Taxes
If you intend to use 2021’s tax bill to project 2022’s liability, take the following adjustments into account:
American Rescue Plan changes
As part of the third coronavirus stimulus package, the American Rescue Plan Act that was signed into law on March 11, 2021, the 2021 tax year saw key changes. Some of these changes remain in place for 2022, while others have not been renewed for the 2022 tax year.
- The American Rescue Plan increased the maximum annual Child Tax Credit from $2,000 a child to $3,000 per child ages 6 to 17, and $3,600 for each child under the age of six. The increase lasted through 2021. Legislation to extend the increased credit for 2022 was not passed. For tax year 2022, the credit will revert back to $2,000 and be partially refundable.
- The investment income limit for 2021 was raised from $3,650 to $10,000. This $10,000 figure will be pegged to inflation and adjusted accordingly every year going forward. For example, in 2022, the amount rises to $10,300. This is a permanent change as part of the American Rescue Plan Act.
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 remains consistent from 2021 to 2022.
Changes in circumstances
Life events can affect your taxes in different ways. 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?
Am I Required to Pay Estimated Taxes?
If you don’t work for an employer who withholds taxes from each paycheck and you expect your tax bill to be more than $1,000, you are required to pay estimated taxes. Self-employed people and small business owners are among those who pay quarterly estimated taxes.
How Do I Pay My Estimated Taxes?
Fill out Form 1040-ES and mail it, along with a check, to the IRS. Or you can make estimated payments online via IRS Direct Pay .
What Happens If I Don’t Pay My Estimated Taxes?
If you don’t pay estimated taxes throughout the year, you will end up with a large tax bill when you file your tax return. You will also be subject to penalties for late payment on the taxes, which are owed quarterly.
The Bottom Line
While estimating taxes isn’t an exact science, coming close to the correct amount will help you avoid penalties if you’re mindful of the quarterly deadlines. It can be a good idea to consult a tax professional when questions arise about complex tax issues.
Internal Revenue Service. "2022 Form 1040-ES," Page 3.
DC.gov. “Emancipation Day.”
Internal Revenue Service. "2022: Form 1040-ES," Page 1.
Internal Revenue Service. “About Form W-4 P, Withholding Certificate for Pension or Annuity Payments.”
Internal Revenue Service. “About Form W-4 V, Voluntary Withholding Request.”
Internal Revenue Service. “About Form W-4, Employee’s Withholding Certificate.”
Internal Revenue Service. "26 CFR 601.602: Tax Forms and Instructions. Page 11."
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