Never accused of oversimplifying things, the IRS doesn’t break the tax year into four three-month quarters. The first quarter is three months (January 1 to March 31), but the second “quarter” is two months long (April 1 to May 31), the third is three months (June 1 to August 31) and the fourth covers the final four months of the year.
The installment payments are due on April 15, June 15, September 15 and January 15 of the following year. You can skip the final payment if you will file your return and pay all the tax due by February 1. If a due date falls on a weekend or legal holiday, the deadline is pushed to the next business day.
You don’t have to make any payment until you have income on which estimated taxes are due. If you know early in the year that you will have to make estimated payments, each of the four payments should be 25% of the amount due.
But what if you receive income during the third quarter that, for the first time, makes you liable for estimated tax payments? Your first payment would be due on the third installment date—September 15—and you are expected to pay 75% of the tax that is due.
To hold your payments to a minimum, base each installment on what you have to pay to avoid the penalty, using any exceptions that benefit you.
If you have a tax refund coming from the IRS, you can elect on your return to have part or all of the money applied to your estimated tax bill. Although the IRS doesn’t pay any interest on such advance payments, it may make sense to use the refund to pay the first installment (due April 15) and perhaps even the second (due June 15) just to save yourself the hassle of writing and sending in the checks.
After you send in an estimated tax payment using a payment voucher, the IRS will automatically send you a package of preprinted vouchers showing your name, address and Social Security number. The payments are made to the IRS service center for your area.
Also note: If at least two-thirds of your gross income is from farming or fishing, you have only one estimated tax payment for the year, which is due by January 15 of the following year. You can even skip making the single estimated tax payment as long as you file your tax return by March 1 and pay any tax due in full.