Self-employed people, such as sole proprietors or independent contractors, must make estimated tax payments to the IRS. You have to submit a payment based on your estimated income for the year. If you don’t pay on time, you could get a financial penalty from the IRS.
What Are estimated tax payments?
Estimated taxes are tax payments made every three months or every quarter. Self-employed individuals are required to make estimated quarterly tax payments to the IRS. You can estimate your tax bill based on your professional income and submit that amount to the IRS each quarter.
The IRS will then assess how much you really owe based on the actual income you earned for the year and either send you a refund or ask for another payment if you underpaid.
Is There a Penalty for Not Paying Estimated Taxes?
You may have a penalty if you don’t pay your estimated quarterly taxes on time. The penalty amount is 0.5% of the amount unpaid for each month or part of the month that the tax isn’t paid. So if you are two months late, the penalty is 1% of the unpaid amount.
To avoid getting penalties, take note of when the estimated tax payment deadlines are. For 2023, the dates are:
– Quarter 1: April 18, 2023
– Quarter 2: June 15, 2023
– Quarter 3: September 15, 2023
– Quarter 4: January 15, 2024
Can You Pay Estimated Taxes All at Once?
The U.S. tax system is “pay as you go,” meaning that the IRS wants you to pay taxes as you earn. If you wait to pay your taxes until you file your yearly return, you’ll most likely owe interest and penalties. Making quarterly payments is usually the most sensible way to pay taxes if you’re self-employed.
At Highland Tax Group, we can help ensure that you pay your estimated tax payment on time, every time. We’ll calculate your estimated payments for you, and we won’t let a deadline pass.