Avoid Underpayment of Tax Penalties
The federal income tax system is a pay–as–you–go system. Taxes must be paid throughout the year, either by withholding from your paycheck or making estimated tax payments. If you don’t pay enough in taxes throughout the year, you may have to pay a tax penalty.
As an employee, you should use the IRS withholding calculator to make sure enough is being withheld from your paycheck. If not enough is being withheld, you can submit a new W-4 form to your employer to change the amount withheld.
The IRS also allows you to make estimated payments throughout the year to avoid the underpayment penalty.
Estimated tax payments are especially useful if you are self-employed. They can be used to pay income tax, self-employment tax, and alternative minimum tax.
How to Calculate
Use the 2020 Estimated Tax Worksheet on page 8 of the IRS Form at https://www.irs.gov/pub/irs-pdf/f1040es.pdf to calculate your estimated tax payment. If your situation for 2020 has not changed, the expected 2020 adjusted gross income, deductions, and credits can be estimated using your 2019 tax return.
If you have recently begun self-employment you can:
- Use this simple tool at https://www.eitcoutreach.org/rideshare/estimated-payments-calculator/ to calculate self-employment tax
- Use the Self-Employment Tax and Deduction Worksheet for lines 1 through 9
When to Pay
Estimated taxes are paid on a quarterly basis:
- January 1 to March 31 – pay by April 15
- April 1 to May 31 – pay by June 15
- June 1 to August 31 – pay by September 15
- September 1 to December 31 – pay by January 15 of following year
How to Pay
You can pay estimated taxes either online, over the phone, or by mailing in a payment.
Online payments can be made using Direct Pay on the IRS website at: https://www.irs.gov/payments
Phone payments can be made using either the IRS2Go mobile app or by calling one of the three approved IRS Service Providers and paying with a debit or credit card (additional fees apply):
- Link2Gov Corporation 1-888-PAY-1040TM (1-888-729-1040) www.PAY1040.com
- WorldPay US, Inc. 1-844-729-8298 (1-844-PAY-TAX-8TM) www.payUSAtax.com
- Official Payments 1-888-UPAY-TAXTM (1-888-872-9829) www.officialpayments.com
Mailing payments by check or money order can be done by printing and filling out the Estimated Tax Payment Voucher on page 9 of the IRS form https://www.irs.gov/pub/irs-pdf/f1040es.pdf
For more information please visit https://www.eitcoutreach.org/rideshare/quarterly-estimated-payments-due-dates/ or the IRS publication at https://www.irs.gov/pub/irs-pdf/f1040es.pdf