The IRS has (not surprisingly) some fairly complex rules about who must make quarterly tax payments. Generally, you must pay if you expect to owe $1000 or more in taxes by the end of the year. (If you expect to make less, you might only pay at year-end. If your income is very small, you might not need to pay at all.)
Do you have to pay estimated quarterly taxes?
Yeah, probably. The IRS follows a "pay as you go" model. For W-2 employees, taxes are withheld from each paycheck—every week or two weeks or whatever the payroll schedule is. For self-employed folks, you too pay as you go, but just 4 times a year.
This means that while the quarterly payments are considered "estimates," taxpayers are expected to tally up any taxes due (or refunds earned) by April 15 for the previous year. Missing this year-end date is more serious and results in higher penalties and interest.
We recommend using TurboTax or consulting an accountant for help in preparing annual taxes. Our product helps you estimate the taxes to pay throughout the year, but is not an official tax preparation service for filing annual taxes.
What happens if you haven't paid, or choose not to pay the estimated payments?
The bad news is that the IRS charges a daily penalty starting from the day your estimated taxes are due until they're paid. The good news is that these penalties are pretty small. If you missed a payment (maybe because your business is making lots of money all of a sudden, or you just didn't know you needed to make quarterly estimated payments) the annual penalty is about 6-8%. So, for example, if you owed $100 in taxes, but you didn't pay at the quarterly tax due dates, you'd owe about $8 in penalties at the end of the year. To calculate any penalties or request a waiver, use IRS Form 2210.
What if your estimated tax payment is 0?
Good news! There's no need to make a $0 estimated tax payment. And you don't need to file a 1040(ES) form either.
Got tax questions? The TurboTax AnswerXChange is a great place to find answers. Read FAQs, ask a question in our community, chat with an agent, or give experts a call.