Estimated taxes explained
If you owe taxes this year, you may need to make Estimated Tax Payments throughout the year. Federal and state governments require these payments to avoid waiting until your next tax return to collect owed taxes. Generally, you must make estimated tax payments if your withholding doesn't cover at least 90% of your tax liability.
Exceptions include:
- No estimated payments are required if the amount due after subtracting withholding and credits is less than $1,000 ($200 for California).
- Typically, no estimates are needed if your total withholding and credits equal or exceed last year's tax liability.
- Failing to pay enough estimated tax or not paying by the deadline results in penalties. The penalty is equivalent to (non-deductible) interest on the underpaid amount for the underpayment period, adjusted periodically based on market interest rates.
- Estimated tax payments are due on April 15, June 15, September 15, and January 16 of the following year. The second payment is due two months after the first. Any payment that falls on a weekend or holiday is due the first non-holiday weekday after that date.
- Summit Financial offers Estimated Payment Vouchers for your convenience (Form 1040ES for Federal; Form 540ES for California).
- Ensure payments are sent to the correct address listed on the voucher. Enclose your check with the voucher and write the primary taxpayer’s social security number, tax year, and payment details (i.e., "2006 2nd Q Form 1040 ES") on the check.
- Maintain accurate records of your estimated tax payments to claim credit on your next tax return. Inform your tax preparer of all payments made, including amounts and dates.
Tax preparation is not provided by or affiliated with LPL Financial