Issue Number: Tax Tip 2026-69Estimated taxes aren’t just for the self-employed Typically, people who are self-employed pay their federal income tax by making estimated tax payments. However, they aren’t the only ones that may need to pay estimated tax. Federal income tax is a pay-as-you-go tax. Which means the tax must be paid as income is earned or received during the year. The two ways federal taxes are paid are either through withholding or estimated tax. Taxpayers who receive income from sources not subject to withholding or don’t have enough withheld, may have to make estimated tax payments. The next estimated tax payment due date is Sept. 15. Let’s take a closer look at who may have to pay estimated tax to ensure they are meeting their tax obligations. Who may pay estimated tax
Self-employed individuals typically pay their tax this way. Even if a taxpayer isn’t self-employed, they still may have to pay estimated tax if they receive income from sources such as:
- Interest
- Dividends
- Alimony
- Capital gains
- Royalties
- Rents
- Prizes and awards
Generally, individuals, including sole proprietors, partners, and S corporation shareholders, must make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. Estimated tax is used to pay not only income tax but other taxes such as self-employment tax and alternative minimum tax. Ways to pay
Taxpayers can pay online, use Form 1040-ES and pay by mail, or by phone. Additionally, individuals can pay through their IRS Individual Online Account, where they can also see their payment history and other tax records.
Businesses can now make most common business tax payments, including estimated taxes and federal tax deposits, through their Business Tax Account or Direct Pay for businesses. Most taxpayers who make estimated tax payments pay on a quarterly basis. However, they can also be made weekly, bi-weekly, monthly, etc. if they have paid enough in by the end of the quarter. Visit IRS.gov/payments to view all the options. For additional information, refer to Publication 505, Tax Withholding and Estimated Tax. Avoid penalties
Taxpayers who didn’t pay enough tax during the year, either through withholding or by making estimated tax payments, may have to pay a penalty. Generally, the IRS can figure this penalty for them. Knowing the requirements and paying on time is key to avoiding any penalties. More information
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