Employees have two choices for paying their income taxes. They can ask the employer to withhold a certain amount from their paychecks, or they can pay from their income. Either way, you have to make these payments on a quarterly basis so that the taxes you owe the IRS doesn’t exceed $1000. If that happens, you will be liable for an underpayment penalty. That’s what Form 1040-ES 2022 is for. It is designed for taxpayers who make quarterly tax payments. You can manually fill out this form or use tax software.
The form is used to calculate your estimated tax payment for the calendar year. Note that the 1040-ES worksheet doesn’t need to be mailed to the IRS. Instead, you have to keep it to simplify your tax records for the financial year.
Who Needs to Make Quarterly Tax Payments?
Those who receive an income that’s not withheld for taxes are supposed to pay an estimated tax every quarter. Tax Day, on April 15th, is when each taxpayer has to file and submit their income tax returns to the IRS. By this time, you need to pay your estimated taxes, especially if you owe more than $1000. You can ask the IRS to extend the last payment date if you are facing a difficult situation. However, you will be liable for an underpayment penalty if you fail to file and pay your tax returns on time.
The best example of those who need to make quarterly estimated tax payments is the self-employed individuals. Since you are supposed to pay the Social Security and Medicare taxes on your own, you need to complete the 1040-ES form for estimated tax payments. Those who report rental or interest income also need to pay estimated tax.
Due Dates for Filing Estimated Tax
The following are the dates when the quarterly estimated tax payments are due.
April 15
June 15
September 15
January 15
If you are paying the estimated quarterly tax payments electronically, there’s no need to fill out Form 1040-ES. Remember that taxpayers with any additional source of income that’s taxable but isn’t withheld from the paycheck needs to fill out Form 1040-ES. A freelancer, sole-proprietor, partner working in a limited liability company, an employee with a side gig, or a contractor who reports income from self-employment sources needs to pay an estimated tax.
Since the tax is calculated based on your estimated income for the current year, there’s a chance you might underestimate the taxable income, which may result in an underpayment penalty. To avoid that, make sure you use the past year’s taxes. Just make sure you have cleared the previous year’s due. Even if you overpay your income tax, you don’t have to worry, as the IRS will issue a refund at the end of the year. Underpayment or late payment penalties are applied to those who fail to pay their estimated taxes in time, even if they are eligible for a tax credit.