If you have self-employment or other income outside of your W-2 paycheck this year, you may need to send the IRS some money before the usual tax-filing time. Here are the due dates for paying quarterly estimated taxes in 2016; they are supposed to be in four equal installments. This is for federal taxes only, state and local tax due dates may be different.
IRS Estimated Tax Payment Calendar for Individuals
| Tax Year / Quarter | Due Date |
| 2016 First Quarter | April 18, 2016 (Monday) |
| 2016 Second Quarter | June 15, 2016 (Wednesday) |
| 2016 Third Quarter | September 15, 2016 (Thursday) |
| 2016 Fourth Quarter | January 17, 2017* (Tuesday) |
* You do not have to make the Q4 payment due January 17, 2017, if you file your 2016 tax return by January 31, 2017 and pay the entire balance due with your return.
Who needs to pay estimated taxes?
In general, you must pay estimated tax for 2016 if both of the following apply:
- You expect to owe at least $1,000 in tax for 2016, after subtracting your withholding and refundable credits.
- You expect your withholding and credits to be less than the smaller of
- 90% of the tax to be shown on your 2016 tax return, or
- 100% of the tax shown on your 2015 tax return. Your 2015 tax return must cover all 12 months.
If you forget to pay (like I’ve done before), then you should make a payment as soon as possible even though it is late. This will minimize any penalty assessed.
How do I pay? When does the payment count?
- By check. Fill out the appropriate IRS Form 1040-ES voucher (last page of the PDF) and snail mail to the indicated address. The date of the U.S. postmark is considered the date of payment. No fees besides postage.
- By online bank transfer. You can store your bank account information and pay via electronic funds transfer at EFTPS.gov or call 1-800-555-4477. It takes a little while to set up an online account initially, so you’ll need to plan ahead. For a quick one-time payment, you can also use IRS Direct Pay (just introduced in 2014) which does not require a sign-up but it also doesn’t store your bank account information for future payments. Both are free, there are no convenience fees. The date of payment will be noted online.
- By debit or credit card. Here is page of IRS-approved payment processors. Pay by phone or online. Fees will apply, but the payment will count as paid as soon as you charge the card. You may also earn rewards on your credit card. Check if there is a discounted fee available via limited-time promotion.
How much should you pay in estimated taxes? You’ll need to come up with an expected gross income and then estimate your taxes, deductions, and credits for the year. The PDF of Form 1040-ES includes a paper worksheet to calculate how much in quarterly estimated taxes you should pay. You can also try online tax calculators like this one from H&R Block to estimate your 2016 tax liability, and divide by four quarters.
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I’ve always found it easier to request additional withholding on my W-4 to match my expected tax. Is there a reason not to do this?
@David The main reason is opportunity cost, where you can be making more off your money then the 0% you would be making from the government holding it. Now, if you are not great with budgeting or putting aside money, then having the government hold onto it might be safer, however managing this yourself is the better decision financially.
Somehow, I doubt the tiny difference in opportunity cost with monthly withholding vs. Quarterly Estimated Payments is the worth the extra hassle and risk of making a mistake and owing penalties.
Is there a way to stop my federal tax withholding from my paycheck? Then I can just pay the taxes myself based on the above schedule. I would use my MasterCard and get 3% cashback. So, paying $10,000 a year in federal taxes would give me $300.
Nick – I’m pretty sure the IRS charges an extra 3% if you use a card – so it’s a wash.
You must have missed last week’s post about paying taxes with a credit/debit card. I have been paying my federal tax due on April 15 for many years and making money by using my MasterCard. So, you are mistaken about it being a wash.
To the best of my knowledge: You can adjust your W-4 to minimize your withholding via your paycheck, for example by listing a high number of exemptions, but I don’t believe you can’t stop it completely.
What happens if you have inconsistent income? For example, you don’t receive any income the first quarter but you anticipate to receive additional income throughout the rest of the year and have a rough idea of how much it will be. Are you still suppose to pay estimated tax for the first quarter?
If your income is really lumpy, there is a special worksheet for the “Annualized Income Installment Method” that matches the timing of your income and the timing of your estimated tax payments.
https://www.irs.gov/publications/p505/ch02.html#en_US_2016_publink1000194657
Unfortunately you have to estimate what your full year income will be and pay each quarter and be accurate to avoid a penalty. Regardless of your actual pattern of earning throughout the year, the IRS assumes it is all earned uniformly on the standard 104 form. For those that receive a bonus on 12/31 this can be problematic to say the least.
There is an alternative way to file your taxes allowed by the IRS to get around this. You have to essentially calculate your income and taxes for each month of the year and roll it up into the year, but in my experience this is a total nightmare. Tracking when you earned income throughout the year is manageable, but you also have to allocate your deductions (if you itemize) by which month you received them. So you need to calculate when you made each charitable contribution and assign it to the correct month, break down the amount of mortgage interest you paid each month (should fall slightly as time goes by), and allocate when you paid your property and state and local taxes by month.
Rather than try to do my taxes 12 times instead of once, I have chosen to pay the penalty in the past, even if it means paying interest on the taxes I owe on compensation received at the end of the year as if I had received it during the year.
Why are the Federal Estimated taxes due on Monday, April 18, 2016, instead of Friday April 15, 2016? And, if you live in MA, NH, or other state that celebrates Patriots Day, when are Fed and state taxes due?
Same reason tax returns are also due 4/18/16 this year; Emancipation Day celebrated on 4/15/16 in Washington DC this year.
I need some major help here. I am an independent contractor and my family has been in financial hardships this past 2016 year. I did not pay my quarterly estimate taxes can I start paying now since I got a small raise in which is due on January 17th 2017? Please advise.
Also if my job is based in Colorado and I work in Illinois, what is the estimated % I should take out?
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