You know how most people have taxes automatically withheld from their paychecks? Well, if you’re self-employed or making good money from investments, you’ve got to handle this yourself through estimated tax payments.
Here’s the deal for 2025 – you’ll need to make four payments throughout the year:
- First payment: April 15, 2025 (for January through March)
- Second payment: June 16, 2025 (for April and May)
- Third payment: September 15, 2025 (for June through August)
- Fourth payment: January 15, 2026 (for September through December)
Expecting income from sale of stock or other sources? You should pay estimated tax instead of waiting until the end of the tax year. By doing so you will not incur a penalty for not paying estimated taxes.
Now, here’s the trick to avoiding penalties – you’ve got to pay either 90% of what you’ll owe this year, or 100% of what you paid last year. Oh, and if you made over $150,000 last year (or $75,000 if you’re married filing separately), that jumps to 110% of last year’s tax. Also, if you owe less than $1,000 the IRS will not charge penalties. Or, if you had no tax liability in the prior year (for a full 12-month period).
Making payments is super easy these days. You can:
- Pay online through the IRS website https://www.irs.gov/
- Use EFTPS (it’s like online banking but for taxes)
- Use the IRS2Go app on your phone
- Mail a check with Form 1040-ES (old-school, but it still works!)
- Direct debit- we can set this up through our tax program
Here’s a pro tip: If you’re itemizing deductions, pay your fourth quarter state estimated taxes by December 31 instead of waiting until January 15. This way, you can deduct them in the current year rather than having to wait.
And hey, if your income is all over the place throughout the year, don’t worry – there’s something called the annualized income installment method that might help you avoid penalties. We can also make a tax plan too, especially if you have a business. Our package plans include this service.
We’re here to help you, so if you have questions about estimated taxes or any other tax topics reach out!
