When Are Estimated Tax Payments Due in 2023?

Estimated tax payments are important because our tax system operates on a "pay-as-you-go" basis, which means the IRS wants its cut of your income when you earn it.

• For employees, the government gets paid through tax withholding each time you get a paycheck (the amount withheld is based on your Form W-4). 
• Retirees can have taxes withheld from Social Security payments and retirement plan distributions, or even have taxes taken out of a required minimum distribution. 
• However, if you're self-employed or don't have taxes withheld from other sources of taxable income (such as interest, dividends, capital gains, alimony, or rental income), it's up to you to periodically pay the IRS by making estimated tax payments.

Estimated tax payments are typically made in four equal installments based on the IRS's annual schedule. Although they're often called "quarterly" payments, the deadlines aren't necessarily three months apart or cover three months of income. 

For the 2023 tax year, the payments are due by the dates shown in the table below.

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There are some rules that allow you to stray from the set schedule above. 

• For instance, if you pay all your 2023 estimated taxes by April 18, 2023, you're off the hook for the rest of the year. 
• If you file your 2023 tax return by January 31, 2024, and pay the entire balance due with your return, you don't have to make the final payment for the 2023 due January 16, 2024.

You also don't have to make estimated tax payments until you have income on which you will owe tax. So, for example, if you don't have any taxable income in 2023 until August, you don't have to make an estimated tax payment until September 15, 2023. At that point, you can either pay your entire estimated tax by the September 15 due date or pay it in two installments by September 15, 2023, and January 16, 2024.

If at least two-thirds of your gross income is from farming or fishing, you can make just one estimated tax payment for the 2023 tax year by January 16, 2024. If you file your 2023 tax return by March 1, 2024, and pay all the tax you owe at that time, you don't need to make any estimated tax payments.

Calculating Your Estimated Tax Payments

Use Form 1040-ES to calculate your estimated tax payments. Start by figuring your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year – there's a worksheet to help you out in the instructions for Form 1040-ES. You can also look at your previous year's tax return for a general guide. What you ultimately want is an estimate of the income you expect to earn for the year.

If your estimate is too high, just complete another Form 1040-ES worksheet to recalculate your estimated tax for the next payment. Likewise, if your estimate is too low, go to the Form 1040-ES worksheet again to readjust your next estimated tax payment. You should also recalculate if your own personal situation changes or if there are tax law changes that can affect your tax liability for the year.

How to Pay Estimated Taxes

Use Form 1040-ES to pay your estimated taxes. There are several ways to pay estimated taxes, including by check, cash, money order, credit card and debit card. There are many online payment options, too, such as the Electronic Federal Tax Payment System (EFTPS). The various payment methods are described in the instructions for Form 1040-ES.

Penalties for Not Making Estimated Taxes

Whether you make estimated tax payments or rely on withholding, you could be hit with a penalty if you don't pay enough tax throughout the year. The penalty doesn't apply if you owe less than $1,000 in tax. You can also avoid the penalty if your 2023 withholding or estimated tax payments equal at least 90% of your 2023 tax liability, or 100% of the tax shown on your 2022 return (110% if your 2022 adjusted gross income was more than $150,000).

State Estimated Taxes

Finally, unless you live in a state with no income tax, you probably owe estimated tax payments to your state, too. Due dates for state payments may or may not coincide with the federal dates, so be sure to check with the appropriate tax agency in your state.