Taxes are a complicated issue. For business owners and self-employed individuals, knowing when and how much to pay can be tricky. In the United States, quarterly estimated taxes are due on April 15th, June 15th, September 15th, and January 15th of each year. In short, these quarterly tax payments are required for individuals who will owe more than $1,000 in taxes for the year. But let's take a closer look.
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Keep reading to learn more about why quarterly tax payments may be required for you.
Who is Required to Pay Quarterly Tax Payments?
If you are self-employed, an independent contractor, or have other forms of income that are not subject to withholding tax, you may be required to make estimated quarterly tax payments. This is because the IRS wants to ensure taxes are collected from taxpayers who don't have an employer withholding taxes from their paychecks throughout the year.
The IRS requires quarterly estimated payments if you will owe at least $1,000 in taxes for the year as a sole proprietor, partner, or S corporation shareholder. Corporations are also expected to pay quarterly taxes if their estimated taxes are expected to exceed $500.
Make sure you report all the income you received during the year. The IRS wants you to report the following:
Social security benefits
Who Doesn't Have to Pay Quarterly Tax Payments?
If you are an employee that has taxes withheld from your paycheck, you won't have to make estimated quarterly payments. Simply, if you get a W-2, this doesn't apply to you. This is because the withholding tax should cover most of what the IRS expects you to pay in taxes for the year.
According to the IRS, you also don't have to pay quarterly taxes if all of the following apply:
You had no tax liability for the prior year
Your prior tax year covered a 12-month period
You were a U.S. citizen or resident for the entire prior year