Having enough tax withheld or making quarterly estimated tax payments during the year can help you avoid problems at tax time. Taxes are pay-as-you-go. This means that you need to pay most of your tax during the year, as you receive income, rather than paying at the end of the year.

Does it matter when you pay estimated taxes?

The rule is that you must pay your taxes as you go. If at filing time, you have not paid enough income taxes through withholding or quarterly estimated payments, you may have to pay a penalty for underpayment. If so, then you’re not required to make estimated tax payments.

When do you have to pay estimated taxes?

When must you pay estimates? If taxes are not withheld from earnings or investment income, estimated tax payments are generally required. Individuals must pay 25% of a “required annual payment” by April 15, June 15, September 15, and January 15, to avoid an underpayment penalty.

How can I Make my estimated tax payments more accurate?

Using such a planning utility can help make your calculations for estimated payments more accurate. You can catch up by paying a little extra with your third and fourth payments if you miss or are unable to make the first or even the second estimated payment, but the sooner you catch up, the better.

What happens if I overpay my estimated tax?

You may have a better use for that money now – not next year. If you overpay one quarter, you may be able to skip the following estimated tax payment altogether. Your minimum quarterly payments to avoid a penalty are cumulative.

Is there penalty for not paying estimated taxes?

A penalty can be avoided if, among other things, you’ve “paid at least 90 percent of the tax for the current year, or 100 percent of the tax shown on the return for the prior year, whichever is smaller,” according to the IRS. Check out these apps for calculating your estimated federal taxes: