Federal Estimated Tax Payments | RSA Deasil Advisors

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Federal Estimated Tax Payments

A quarterly estimated tax payment is the money you pay to the IRS to satisfy your annual tax obligation. The amount you pay will be based on the income you expect to earn in a given calendar year. Most Americans are W-2 employees where their company’s HR department makes these payments for you based on the number of exemptions you give them.

When you are self-employed, you are responsible for making payments to the IRS. If you find yourself in a situation where you have earned income, but the taxes you owe are not being automatically withheld, you will have to make quarterly estimated tax payments.

Quarterly estimated tax payments should be made before the payment deadline listed below.

In a perfect world, you would make equal payments based on the schedule below –

January 1^st – March 31^st(Payment due April 15^th)
April 1^st – May 31^st (Payment due June 15^th)
June 1^st – August 31^st (Payment due September 15^th)
September 1^st – December 31^st (Payment due January 15^th)

Failure to make enough estimated tax payments, either through withholdings or by making estimated tax payments, can create a penalty for underpayment of your estimated tax. You do not have to be perfect with these estimates. Most taxpayers will avoid this penalty if they owe less than $1,000 in taxes after subtracting their withholdings 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.

According to the IRS, sole proprietors, and those with a pass-through entity, “Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.”

We will focus the remainder of this article on how to pay your quarterly taxes online utilizing the Electronic Federal Tax Payment System (EFTPS) if you are a sole proprietor. According to the IRS, “Using the Electronic Federal Tax Payment System (EFTPS) is the easiest way for individuals as well as businesses to pay their federal taxes.

The most significant benefit I find from using EFTPS is the ability to review past payments. As you make payments throughout the year, you will be able to track what has been paid and how much is still owed. You can even schedule regular payments so you will not forget.

How to Create an Account

Step 1

Before you try to create an account, make sure you have the following pieces of information;

Social Security Number
Mailing Address
Bank Information (Account & Routing Number)

Step 2

Go to the EFTPS website – https://www.eftps.gov/eftps/

Click enroll
Accept the privacy and paperwork reduction and enroll as an Individual
Insert the requested information review and click complete

Step 3

After you enroll, the IRS will mail you a four-digit PIN and an enrolment number. (This could take 5-7 business days before you receive the letter in the mail)

Step 4

When you get your PIN in the mail, you can now log into the System. Go back to the EFTPS website –https://www.eftps.gov/eftps/.

Click login on the top menu bar
Click need a password
Enter your social security number & PIN from the IRS
Insert the last eight digits of your enrollment number
Create a password

Step 5

Now you can login into your account and begin making tax payments.

Log into your account.
Clicked ‘Make a Payment’ on the left-hand side.
Under tax form enter 1040
Select ‘Estimated 1040ES’
Go to payments
Insert payment amount, tax period, & payment date

You have completed making your tax payment. I hope this guide is useful in the future when you are estimating your tax obligation.

For more information about satisfying your tax obligation, please consult a tax professional (enrolled agent or CPA). If you would like investment strategies to limit the amount of taxes you have to pay each year, please use the contact information below to schedule your free consultation.

Randall Avery, CFA

Financial Advisor │ Author │ Public Speaker

R.S.A. Deasil Advisors, LLC

Office: 531-333-2745

Email: Deasil@rsadeasil.com

Website: www.rsadeasil.com

P.S. If you would like me to speak at your next event, please click HERE

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