Don't Mess With Taxes

Reviewed and updated Thursday, Sept. 14, 2023.

Tax Day comes four times a year for millions of taxpayers. We (yes, I'm one of them) must make estimated tax payments, that are due on April's regular Tax Day and three other days throughout the current and coming year.

Why the extra tax filings? Because our tax system is pay as earn, which for most employed people is taken care via withholding from their paychecks.

But folks who get income that's not subject to withholding — for example, from gig work or other self-employment endeavors; investment/capital gains earnings; prize or gambling winnings; or even Social Security and other pension benefits — must take care themselves of sending Uncle Sam the income tax due on those amounts.

This is accomplished by making estimated tax payments.

Estimated tax timing: The first estimated tax deadline is the April 15, or later date if that falls on a federal holiday or weekend day. Both of those — the 15th on Saturday and the Emancipation Day holiday on Monday, April 17, push this year's Tax Day and first estimated tax payment to April 18.

The rest of this year's estimated taxes are due on the regular schedule shown below. As it shows, although they are called quarterly estimated taxes, that simply means four of them, not time frames we usually think of when we divide the calendar into quarters.

A little estimated tax planning for 2024. Jan. 15 next year is the MLK Day holiday, so the final 2023 tax year estimated tax amount will be due on Tuesday, Jan. 16.

The Internal Revenue Service prefers that you guesstimate how much money subject to estimated tax you'll get during the full tax year, divide that total by four, and send those equal amounts on the four due dates.

However, the four equal installments method isn't required. In fact, the annualized income option is a good move for some to use in calculating estimated tax payments for people whose earnings not subject to withholding vary throughout the year. This means you pay the amount of estimated tax on the actual amount of earnings you made during the payment quarter.

True, this variable estimated tax payment method requires more record keeping and calculations, but it could help with cash flow. My post on annualized income estimated tax payments has more on this choice.

Ways to pay: Now that you know you must pay estimated taxes, here are the ways that the IRS will gladly take your money.

You can pay online using one of the many electronic payment options approved (and encouraged) by the IRS. You can find more details on sending in your estimated taxes electronically at IRS.gov's special payments page, but here's a quick preview:

1. Direct Pay allows online transfers directly from your checking or savings account at no cost to you.
2. Pay by Card lets you pay by debit or credit card or digital wallet. In these cases, a service fee is charged by the payment processors. The three vendors the IRS has approved for 2023 payments are payUSAtax; Pay1040; and ACI Payments, Inc. Remember that each processor charges a fee for transactions.
3. Pay using your online taxpayer account. If you don't have an existing IRS username or ID.me account, have your photo identification ready. More information about identity verification is available on the IRS.gov taxpayer account sign-in page.
4. IRS2Go is the IRS' mobile app with which you can access Direct Pay or Pay by Card.

Another online payment option, and one I've used for decades to make annual and estimated tax payments is the Treasury's Electronic Federal Tax Payment System (EFTPS) website. You tell EFTPS how much you want to pay for what tax purpose and when you want the money sent directly from your bank account to Uncle Sam.

I like it partly because it's free, and partly because I can set-and-forget all my year's estimated payments. Then the only thing I have to remember is making sure I have enough money in my bank account to cover the tax payments. EFTPS (pronounced eff-tips in case you want to tax name drop) helps here, too. It sends an email reminder — that's mine below — before the payment date.

If you're not into advance tax planning, you can make an EFTPS payment as late as 8 p.m. Eastern Time — note the time zone and adjust for where you live — at least one calendar day before the tax due date.

The one downside to using EFTPS is that you must enroll. You can do that either online or have an enrollment form mailed to you. The process takes a couple of days, so if you're not already enrolled, EFTPS probably isn't an option for the April 18 payment. But if you're interested in using it for future tax payments, check into EFTPS now.

If you're still at least a bit old-school, you can pay by phone by calling toll-free one of the IRS-approved debit or credit card service providers. To make a payUSAtax phone payment call 1-844-PAY-TAX-8 (1-844-729-8298). Pay1040's phone payment line is 1-888-PAY-1040 (1-888-729-1040). Phone payment via ACI Payments, Inc. is at 1-800-2PAY-TAX (1-800-272-9829). Remember, each vendor charges a fee that varies by provider, card type, and payment amount.

Also, if you've signed up for EFTPS and want to pay by phone rather than using the website or don't have online access, call the system's toll-free tax payment number (800) 555-3453. It's available 24 hours a day, 7 days a week.

For those who are truly and totally old-school, you still snail mail the IRS a paper check or money order. I've done this when I didn't schedule a payment for whatever reason. OK, the reason was I had to transfer money to my checking account to pay my tax bill.

In that case, mailing your tax payment has an advantage. You meet your estimated tax obligation by simply getting the payment in the mail in time to get it postmarked by the due date. Just like when sending in your annual tax return, the postmark counts as timely filing.

The day or so it takes the voucher and check to get to the IRS should give your bank time to clear the transfer so that your check won't bounce.

If you do decide to mail your estimated tax payment, download the estimated tax package and include the appropriate payment voucher with your payment. Below is the voucher for the first 2023 tax year payment.

See more tax forms and more about them at 2022's Talking Tax Forms and Tax Forms 2023.

Make your check or money order payable to "United States Treasury," not the IRS. Write "2023 Form 1040-ES" and your Social Security number on your check or money order. If you are filing a joint estimated tax payment voucher, enter the tax identification number that you'll enter first on your joint return.

Enclose, but do not staple or attach your payment with the estimated tax payment voucher. And check the mailing addresses, based by your state of residence, at the back of the 1040-ES form to find the correct address to which to mail your payment.

Yeah, the IRS' check policies are pretty precise. You can see other IRS check writing rules are in this post.

Penalties for not paying ES: If you're thinking of ignoring estimated taxes, think again.

If you have a paycheck paying job in addition to your side earnings, you could avoid estimated tax payments by upping your job withholding so that it's enough to cover all the money you're making.

Be careful, however, in making this calculation. Generally, if you owe tax of $1,000 or more when you file your annual tax return, you could face a penalty for underpaying your taxes.

And if that money was from sources not subject to withholding, you also could face late-payment fines for not remitting it during the proper estimated tax quarters.

More time for disaster area taxpayers: Finally, a few estimated tax payers get a reprieve. Because they live in areas that sustained damage from major natural disasters, they get more time to file their 2022 tax returns and make estimated tax payments.

In 2o23, Mother Nature's wrath has delayed, as of Sept. 13, estimated tax (and other) tax filings and payments for affected residents and businesses in 10 states. The areas are in Alabama, Alaska, California, Florida, Georgia, Hawai'i, Illinois, Mississippi, South Carolina, and Vermont.

If you live in one of these disaster areas, you can find more details about your new deadlines in my post Disasters mean some taxpayers get more time to pay September's estimated taxes.

Estimated tax requirements also are different for farmers and fishermen. If that's your job, you can find more on these special estimated tax rules in IRS Publication 505, Tax Withholding and Estimated Tax.

You also might find these items of interest:

• The scoop on paying estimated taxes
• How to get your tax withholding just right
• A quick estimated tax Q&A in advance of the April deadline

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