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.

September 2025 Newsletter

By Sarah Bolton • September 9, 2025
Our regularly updated newsletter provides timely articles to help you achieve your financial goals. Please come back and visit often. Feature Articles The QBI Deduction: Good News for Eligible Business Owners 3 Family-Friendly Tax Benefits in the New Tax Law Before a Weather Emergency Closes Your Business, Make a Plan Tax Tips Seniors May Be Eligible for a New Deduction Separated or Divorced? Know Your Tax Obligations An Employee Benefit That Also Saves Tax for Your Business Just Got Better

September 2025: Upcoming Tax Due Dates

By Sarah Bolton • September 9, 2025
September 15 Individuals: Pay the third installment of 2025 estimated taxes (Form 1040-ES), if not paying income tax through withholding or not paying sufficient income tax through withholding. Calendar-year corporations: Pay the third installment of 2025 estimated income taxes, completing Form 1120-W for the corporation’s records. Calendar-year S corporations: File a 2024 income tax return (Form 1120-S) and provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1 if an automatic six-month extension was filed. Pay any tax, interest and penalties due. Calendar-year S corporations: Make contributions for 2024 to certain employer-sponsored retirement plans if an automatic six-month extension was filed. Calendar-year partnerships: File a 2024 income tax return (Form 1065 or Form 1065-B) and provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1 if an automatic six-month extension was filed. Employers: Deposit Social Security, Medicare and withheld income taxes for August if the monthly deposit rule applies. Employers: Deposit nonpayroll withheld income tax for August if the monthly deposit rule applies. September 30 Calendar-year trusts and estates: File a 2024 income tax return (Form 1041) if an automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due. October 10  Individuals: Report September tip income of $20 or more to employers (Form 4070).

An Employee Benefit That Also Saves Tax for Your Business Just Got Better

By Sarah Bolton • September 9, 2025
If a couple gets separated or divorced, it affects tax obligations. The IRS considers couples married for tax purposes until a final decree is issued. After separating or divorcing, update your Form W-4 with your employer and check withholding using the IRS estimator.  Generally, alimony payments and child support payments aren’t deductible by the paying spouse or included in the taxable income of the recipient spouse. (Tax treatment of alimony payments is different if they’re being made under agreements entered into on or before December 31, 2018.) Property transfers due to divorce typically aren’t taxed but may require a gift tax return. Also, be aware that only one parent can claim a child as a dependent.