As a U.S. citizen, you may be required to make quarterly tax payments if you have income that is not subject to withholding tax or if the tax withheld from your income is not enough to cover your total tax liability for the year. Quarterly tax payments, also known as estimated tax payments, are a way for individuals to prepay their taxes on income that is not subject to regular withholding, such as self-employment income, rental income, investment income, and other sources of taxable income.
Why Are Quarterly Tax Payments Important for U.S. Citizens?
- Tax Compliance: Making quarterly tax payments helps you stay compliant with the U.S. tax system. It ensures that you are paying your taxes throughout the year, rather than waiting until you file your annual tax return.
- Avoiding Penalties: If you do not make sufficient quarterly tax payments, you may be subject to underpayment penalties when you file your tax return. By making timely and accurate payments, you can avoid these penalties.
- Preventing Tax Bill Shock: Making quarterly payments allows you to spread out your tax liability over the year, avoiding the shock of a large tax bill when you file your tax return.
- Self-Employment Income: If you are self-employed, making quarterly tax payments is especially important since you do not have an employer withholding taxes from your income.
- Other Income Sources: If you have income from sources not subject to withholding, such as rental income or investment income, making estimated tax payments ensures you are covering your tax liability on those earnings.
When Are Quarterly Tax Payments Due for U.S. Citizens?
The due dates for quarterly tax payments for U.S. citizens are as follows:
First Quarter (Q1): Due April 15
Second Quarter (Q2): Due June 15
Third Quarter (Q3): Due September 15
Fourth Quarter (Q4): Due January 15 of the following year
It’s essential to mark these dates on your calendar to ensure you make your payments on time.
How to Make Quarterly Tax Payments for U.S. Citizens?
There are several ways to make quarterly tax payments in the United States:
- Online Payment: You can make payments electronically using the Electronic Federal Tax Payment System (EFTPS) on the IRS website.
- Mail-in Payment: You can send a check or money order with Form 1040-ES to the appropriate IRS address. The payment voucher (Form 1040-ES) can be found on the IRS website.
- Credit or Debit Card: You can also make payments using a credit or debit card through authorized payment processors. Keep in mind that there may be associated fees for using this option.
- Direct Pay: You can use the IRS’s Direct Pay option to make payments directly from your bank account.
It’s crucial to calculate your estimated tax liability accurately to avoid underpayment penalties. If you are unsure about your tax situation or how much to pay, consider consulting with Matthew Jennings, JD, MBA, EA, RFC®, CEP®, CES™, aka Tax King Matt or use the IRS’s online tools and resources to estimate your payments accurately.
In conclusion, making quarterly tax payments is important for U.S. citizens with income not subject to withholding to ensure tax compliance, avoid penalties, and manage their tax liability throughout the year.