Should You Be Making Estimated Payments?

Sarah B

If your federal tax withholding isn’t enough to cover your total tax liability, you may need to make estimated tax payments. This typically applies if you have income from sources such as interest, dividends, capital gains or self-employment. The following rules explain how to make these payments without incurring an underpayment penalty.


How Much to Pay and When

Individuals subject to estimated tax requirements generally must pay 25% of a “required annual payment” by April 15, June 15 and September 15 of the tax year and January 15 of the following year to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due on the next business day.


So the third installment for 2025 is due on Monday, September 15. Payments are made using Form 1040-ES and may be made electronically or on paper.


Who Must Pay

The general rule is that you may have to pay estimated tax for 2025 if both of these conditions apply:


1. You expect to owe at least $1,000 for 2025, after subtracting your withholding and tax credits, and


2. You expect your withholding and tax credits to be less than the smaller of:


90% of your 2025 tax liability or 100% of your 2024 tax liability (110% if your 2024 adjusted gross income was more than $150,000, or $75,000 if you’re married filing separately in 2025).


Calculating Payments

If you do have to pay estimated taxes, calculating them requires projecting total income, deductions, credits and withholding for the year. After determining the required annual payment, divide that number by four and make four equal payments by the due dates.


But you may be able to use the annualized income method to make smaller payments during part of the year. This method is helpful to people whose income flow isn’t uniform over the year, perhaps because the business is seasonal.


For example, suppose your income comes exclusively from a business operated in a resort area during June, July and August. In that case, you may not have to make an estimated payment, or as large a payment, for the first two installments, and then you’ll need to “catch-up” when you make the third installment payment.


For More Information

If you have questions about the estimated tax rules and how they apply to you, contact the office.

January 2026 Newsletter

By Sarah Bolton • January 7, 2026
Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often. Feature Articles Can You Claim a Tax Deduction for Tips or Overtime Income? Businesses: Act Soon to Take Advantage of Clean Energy Tax Incentives Make Smart Choices With a Sudden Windfall Tax Tips 2026 Tax Law Changes for Individuals Heavy Tax Breaks for Heavy Business Vehicles More Taxpayers May Qualify for the Casualty Loss Deduction

January 2026: Upcoming Tax Due Dates

By Sarah Bolton • January 7, 2026
January 15 Employers: Deposit nonpayroll withheld income tax for December 2025 if the monthly deposit rule applies. Individuals: Pay the fourth installment of 2025 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. February 2 Employers: File 2025 Form W-2 (Copy A) and transmittal Form W-3 with the Social Security Administration. Employers: File a 2025 return for federal unemployment taxes (Form 940) and pay any tax due if all the associated taxes weren’t deposited on time and in full. Employers: Report Social Security and Medicare taxes and income tax withholding for the fourth quarter of 2025 (Form 941) if all of the associated taxes due weren’t deposited on time and in full. Employers: Provide 2025 Form W-2 to employees. Businesses: Provide 2025 Form 1098, Form 1099-MISC (except for those with a February 18 deadline), Form 1099-NEC and Form W-2G to recipients. Individuals: File a 2025 income tax return (Form 1040 or Form 1040-SR) and pay the tax to avoid penalties for underpaying the January 15 installment of estimated taxes. February 10 Employers: File a 2025 return for federal unemployment taxes (Form 940) if all associated taxes due were deposited on time and in full. Employers: Report Social Security and Medicare taxes and income tax withholding for the fourth quarter of 2025 (Form 941) if all associated taxes due were deposited on time and in full. Individuals: Report January tip income of $20 or more to employers (Form 4070). 

More Taxpayers May Qualify for the Casualty Loss Deduction

By Sarah Bolton • January 7, 2026
Starting in 2026, personal casualty loss deductions will no longer be limited to federally declared disasters. Certain state-declared disasters will also be eligible. For a disaster to qualify, the governor (or D.C. mayor) and the U.S. Treasury Secretary must agree that the damage is severe enough to apply these rules. Now more taxpayers affected by natural disasters or by fires, floods or explosions, regardless of the cause, may qualify.  Note that taxpayers can still claim personal casualty losses not attributable to federally or state-declared disasters, but only to the extent of any personal casualty gains. Need guidance? Contact the office for help.