Quarterly Tax Estimates

Do you owe estimated taxes? How do you know if you do?

First off, let’s talk about why anyone would need to pay estimated taxes. The IRS expects all taxpayers to pay their tax evenly throughout the year. Most taxpayers do this through payroll withholding. Many taxpayers are not subject to withholding and need to estimate how much to pay to the IRS on a quarterly basis. Some examples of taxpayers that might need to make estimated tax payments include:

  1. Small business owners

  2. Someone who has a side hustle

  3. Contractor (no payroll or federal taxes withheld)

  4. You have insufficient withholding

  5. You have significant income not subject to withholding (interest, dividends, capital gains, etc.)

When are estimated tax payments they due to the IRS?

Estimated tax payments are due as follows:

  • January 1 to March 31 due on April 15

  • April 1 to May 31 due on June 15

  • June 1 to August 31 due on September 15

  • September 1 to December 31 due on January 15 of the following year

What happens if you don’t make estimated tax payments?

If you do not make estimated tax payments to the IRS, you could be subject to the Estimated Tax Penalty. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholding and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. (Note: some higher-income taxpayers will need to pay 110% of their previous year’s tax liability in the current year to avoid this penalty).

How can Sienna Consulting help?

You can use our quick and simplified estimated tax calculator here or you can have one of our team member perform a more precise estimate calculation for you. At Sienna Consulting, we help our clients by performing what we refer to as a “mini tax prep” in order to calculate your estimated taxes due to the IRS. We collect all of your basic tax information on a year-to-date basis each quarter and project your income for the remainder of the year to appropriately calculate the estimated taxes due using the most accurate marginal tax rate. We charge $150 per quarter for this service and we will provide you with your estimated tax due as well as instructions on how to make the payment to the IRS.

Shoot us an e-mail at estimates@sienna-consulting.com to secure a spot for your estimate calculation.

Amanda Walker