When are quarterly estimated taxes due?
Federal estimated tax payments for individuals are due four times a year, in mid-April, mid-June, mid-September, and mid-January of the following year, with each date shifting to the next business day when it falls on a weekend or holiday. The quarters are not equal calendar quarters: the first covers January through March, the second only April and May, the third June through August, and the fourth September through December. Current-year dates are listed on the TimTax tax calendar at asktimtax.com/tax.
How do I avoid an underpayment penalty?
Internal Revenue Code Section 6654 sets a required annual payment, and covering it stops the penalty regardless of what is owed at filing. It is the lesser of 90% of the current year's total tax or 100% of the prior year's total tax, and the prior-year figure becomes 110% where prior-year adjusted gross income exceeded $150,000. That amount is not an annual target that can be met whenever convenient: each required installment is 25% of it, due on its own date, unless the owner establishes a lower annualized income installment for that period, so a shortfall in one period is not cured by paying more in a later one. The prior-year measure is the more predictable one because it rests on a number already known, but it is unavailable if the preceding year was not a taxable year of 12 months or no return was filed for it. That test looks at the owner as an individual, not at the age of the business: an owner who filed a personal return for last year keeps the prior-year safe harbor even in the practice's first year.
Should an S-corp owner pay estimated taxes or increase payroll withholding?
Withholding has a timing advantage that estimated payments do not. Federal income tax withheld from wages is treated as having been paid evenly across the year no matter when it was actually withheld, so increasing withholding on a November or December payroll can retroactively cure a shortfall from earlier quarters. An estimated payment is credited only as of the date it is made, so a late payment leaves the earlier quarters underpaid and the penalty for those periods intact. An owner who runs payroll therefore has a repair tool available until year end that a pure estimated-tax payer does not.
What happens if I miss a quarterly estimated payment?
The Section 6654 addition to tax is not a flat fine. It is computed like interest on the amount underpaid for each day it stays underpaid, at the federal short-term rate plus three percentage points, adjusted quarterly. Two consequences follow: the cost of being late is proportional to the amount and the delay rather than fixed, and paying as soon as the shortfall is noticed genuinely reduces it. There is no benefit to waiting for the next scheduled due date.
Do S-corp owners owe estimated tax on distributions?
The estimate has to cover the shareholder's share of the corporation's income, not the cash taken out. An S-corporation shareholder is taxed on the full distributive share reported on the Schedule K-1 in the year it is earned, whether or not a distribution was made. An owner who plans estimated payments around salary and cash draws alone will be short whenever the business earns more than it distributes.
How do I actually make an estimated tax payment to the IRS?
Individuals can pay directly from a bank account at no charge through IRS Direct Pay, or by enrolling in the Electronic Federal Tax Payment System (EFTPS), which also handles business deposits. Payments and payment history are visible in an IRS Online Account, which is the fastest way to confirm what has actually been credited to a year before filing. Card payments go through third-party processors and carry a fee.
General educational information about United States federal tax rules, current as of the review date above. Tax law changes and every situation turns on its own facts. This is not tax, legal, or financial advice and does not create a client relationship. Inflation-adjusted figures should be confirmed for the year in question before relying on them.
