Use this calculator to estimate your state and federal tax liability for 2016. Any business that will owe more than $1000 in federal income tax is required to pay quarterly taxes. Once you figure your tax liability you can divide the total by 4 and remit payments to the IRS each quarter. This ensure you come close to breaking even when you file your income tax return the following tax season.
Who has to pay estimated income tax?
There are many taxpayers who, for various reasons, do not pay sufficient taxes through withholding to pay off their complete tax burden. These taxpayers are usually self employed, have a non-traditional job, or earn the majority of their income from non-wage sources like investment income. Because the money these taxpayers earn isn’t subject to tax withholding by an employer, the taxpayer may be required to send a quarterly check to the IRS to cover taxes they would have otherwise paid through tax withholding. If you earn income that isn’t subject to tax withholding, you can use the following criteria to determine if you have to pay estimated income taxes:
Do you expect to owe more than $1,000 to the IRS when you file your income tax return in April?
YES – You are required to make estimated tax payments
NO – See step twoWill the total tax withheld from your income this year equal 100% of the tax you paid last year, or at least 90% of your tax burden this year?
YES – You do not have to pay estimated income tax
NO – You are required to make estimated tax payments
How much estimated tax do I have to pay?
The amount you have to pay in estimated taxes over the course of the year must be at least 100% of what you owed the IRS last year, or 90% of what you will owe the IRS this year. If your yearly income is variable and can’t be predicted easily, or if your income this year will be significantly higher then last year’s, you may prefer to use last year’s income to determine your estimated tax payments. If you choose to use last year’s income, just divide your total tax liability from your most recent 1040 by four to get your quarterly income tax payment. If you prefer to pay based on this year’s income, multiply your estimated income tax liability by .9 and divide the result by four to determine your quarterly estimated tax payment.
When are your quarterly taxes due?
January 1 - March 31, 2016
April 1 - May 31, 2016
June 1 - August 31, 2016
Sept. 1 - Dec. 31, 2016
April 18, 2016
June 15, 2016
September 15, 2016
January 15, 2017
- If you underpay your estimated taxes (or don’t pay at all), you will be subject to a penalty and interest when you file your tax return in April
- If you are self-employed, your estimated tax payments must also cover Social Security and Medicare payroll taxes
- Late quarterly payments may be subject to a penalty. Payments must be postmarked by the due-date
- If you have to pay federal estimated tax, your state may also require you to make estimated payments on your state income tax. Check with your state’s Department of Revenue for details
If you have any questions about estimated tax payments, you can contact the IRS toll-free tax hotline at 1-800-829-1040.