If you’re an owner of a Partnership, S-Corporation, or Sole Proprietorship and don’t have withholding from paychecks, or if you have a lot of income from investments or rental properties, you probably have to make estimated tax payments. These payments must be sent to the IRS and State governments on a quarterly basis. The third quarter 2019 estimated tax payment deadline for individuals is Monday, September 16.
You must make sufficient federal and state income tax payments before the April filing deadline through withholding, estimated tax payments, or a combination of the two. Estimated tax payments are spread out through the year. The due dates are April 15, June 15, September 15 and January 15 of the following year. However, if the date falls on a weekend or holiday, the deadline is the next business day (which is why the third quarter deadline is September 16 this year).
If you fail to make the minimum required payments, you may be subject to an underpayment penalty.
In general, you must make federal estimated tax payments for 2019 if both of the following apply:
- You expect to owe at least $1,000 in tax after subtracting tax withholding and credits, and
- You expect withholding and credits to be less than the smaller of 90% of your tax for 2019 or 100% of the tax on your 2018 return — 110% if your 2018 adjusted gross income was more than $150,000 ($75,000 for married couples filing separately).
Most individuals make estimated tax payments in four equal installments and rely on the “prior year safe harbor” method. However, if your expected 2019 income is substantially different than 2018, or if your business is seasonal, you may be able to make smaller estimated tax payments in the 1st and 2nd quarters (and sometimes 3rd quarter) using the “annualized income method.” This can be useful to people whose income isn’t uniform over the year. You may also want to modify your quarterly estimates if a large portion of your income comes from capital gains on the sale of securities that you sell at various times during the year.
Contact your Wegner CPAs tax advisor if you think you may be eligible to modify your estimated tax payments under the annualized income method, or you have any other questions about how the estimated tax rules apply to you.