Categories: General Tax Terms
Estimated Payments refer to periodic payments made to the tax authorities throughout the year, rather than a lump sum at the end of the tax year, to cover expected tax liabilities. These payments are typically required for individuals and businesses that anticipate owing tax of a certain amount.
Estimated payments are calculated based on the taxpayer’s expected annual income, deductions, and credits. For most taxpayers, estimated payments are made in four installments, generally due in April, June, September, and January of the following year.
For example, a self-employed individual who expects to owe $4,000 in taxes for the year would make estimated payments of $1,000 each quarter to avoid underpayment penalties.
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