Estimated Income Tax Payments

Estimated
Tax Payments

Estimated income tax payments are made to pay taxes on income generated in a given tax year - now 2020 - that is not subject to periodic tax withholding payments as for example wages are via the W-4 form.

If a taxpayer generates the following types of incomes, etc. throughout a given tax year, it is most likely subject to estimated income tax payments via period payments:

Who Should Make Estimated Tax Payments

Beyond the above listed income types, here are the general guidelines on who should make estimated income tax payments: 

  • Expected income tax amount for the given tax year is at least $1,000 after deducting withholding and refundable tax credits.
  • Tax withholding and refundable tax credits are less than the smaller of:
    • 90% of the taxes of your 2020 tax return.
    • 100% of the taxes shown on your 2019 tax return.

Like with most taxing guidelines, there are exceptions to this. You don't have to pay tax estimates for 2020 if the following apply: 

  • You were US Citizen or resident alien during 2019 and you had no tax liability for the full 12 month 2019 Tax Year. No tax liability for 2019 means your tax was zero or you were not required to file an income tax return.
  • There are special rules for farmers, fishermen, certain high income individuals, and certain household employees.
  • For more details, see instruction on Form 1040-ES.
  • Online Payment Options

Estimate Your Income Taxes

Important Tax Tips on how to estimate your given calendar year tax amount:

  • Use the free eFile.com 2020 Tax Year Tax Calculator and estimate your income and taxes for the year:

    2020 Tax Year Calculator

  • If you also receive W-2 income in addition to the income types listed above, you can increase your federal tax withholding via Form W-4. The W-4 form has a line that allows you to withhold an additional income tax amount. Use the eFile.com WITHHOLDucator to calculate the given calendar year tax return.
  • If your income changes throughout the year (e.g. after March 31, 2020) or your income changes drastically. you should make estimates based on the annualized income installment method. See instructions on Form 1040-ES or Publication 505 chapter 2 (this publication has not been published for 2020 as of July 1, 2020).
  • The IRS may apply a penalty if you didn’t pay enough estimated taxes for the year, you didn’t pay the required estimate amount, or didn't pay on time.

Form 1040-ES and Payment Methods

Form 1040-ES Deadlines

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