When Are Estimated Tax Payments Due in 2023?

Making estimated tax payments is important since the U.S. tax system operates on a "pay-as-you-go" basis. This means that the IRS expects you to pay a portion of your income as soon as you earn it. 

• As an employee,  as many of you know, the government automatically withholds taxes from your paycheck based on your Form W-4. 
• Also, retirees may have taxes taken from their Social Security payments and retirement plan distributions. 
• However, what if you are self-employed or don't have taxes withheld from other sources of taxable income, such as dividends, capital gains, interest, rental income, or alimony? In that case, you are responsible for making estimated tax payments to the IRS.

When paying estimated taxes, you usually make four equal payments and follow the IRS's yearly schedule. Estimated tax payments are commonly referred to as "quarterly" payments, even though they might not necessarily be three months apart or cover three months of income. 

The table below shows the payment deadlines for the 2023 tax year. (But note that aome people might have extended IRS tax deadlines for estimated tax payments due to residing or working in IRS-designated disaster areas.)

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Sometimes, you can deviate from the set schedule by following specific rules. 

For example, if you pay all your estimated taxes for 2023 before April 18, 2023, you will not have to pay any more taxes for the rest of the year. 

Additionally, if you submit your 2023 tax return by January 31, 2024, and pay the entire balance due at that time, you won't have to make the final estimated payment for 2023, which would normally be due on January 16, 2024.

Also, you only need to make estimated tax payments if you have taxable income. For instance, if you have taxable income in August 2023, you don't have to make an estimated tax payment until September 15, 2023. You can pay the entire estimated tax by the September 15 due date or pay it in two installments by September 15, 2023, and January 16, 2024.

If more than two-thirds of your income is from farming or fishing, you only need to make one estimated tax payment for the 2023 tax year, due by January 16, 2024. If you meet the farming/fishing income threshold and file and pay your taxes by March 1, 2024, you don't need to make any estimated payments. 

Calculating your estimated tax payments

To calculate your estimated tax payments, use Form 1040-ES. First, determine your expected adjusted gross income (AGI), taxable income, taxes, deductions, and credits for the year. Then follow the instructions on the Form 1040-ES  worksheet to assist you in this process. 

You can also refer to your previous year's tax return as a general guide. Your goal is to estimate your expected annual income. 

If you overestimated your tax, you can adjust your estimated tax payments using another Form 1040-ES worksheet. You can also recalculate your tax estimate if your personal circumstances change or if there are any tax law changes that may impact your tax liability for the year.

How to pay estimated taxes

To pay estimated taxes, use Form 1040-ES. You can pay by check, cash, money order, credit card, or debit card. There are also online payment options like the Electronic Federal Tax Payment System (EFTPS). The instructions for Form 1040-ES explain the different payment methods. 

Penalties for not making estimated taxes

To avoid tax penalties, make sure to pay at least 90% of your 2023 tax liability through withholding or estimated tax payments. If your adjusted gross income was over $150,000 in 2022, pay 110% of the tax shown on your 2022 return to avoid penalties. If your tax debt is less than $1,000, you won't be penalized.

State estimated taxes

If you live in a state with income tax, remember that you might need to make estimated tax payments to your state as well. The due dates for state payments may differ from the federal dates, so make sure to check with your state's tax agency. 

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