Let's talk about estimated tax payments. I know, not a fun topic, but an important one.
Missing an estimated tax payment can result in non-deductible penalties. Make timely payments via IRS Direct Pay or EFTPS— these are secure and convenient methods to help you avoid the penalties.
Here is what you need to know:
- Due dates. Payments are due April 15, June 16, and September 15, 2025, and January 15, 2026.
- Avoid penalties. Pay at least 90 percent of your current year’s tax or 100 percent of last year’s tax—or 110 percent if prior-year adjusted gross income (AGI) exceeds $150,000.
- Catch-up payments. Catching up when you miss a payment stops the penalty from accruing further but does not achieve forgiveness for the previous penalty assessed.
What if you missed the April 15th estimated tax payment?
Missing a deadline can be costly. The IRS currently charges a 7 percent penalty for underpayments.
But here’s good news: strategic withholding can often help you avoid or erase those penalties—even late in the year.
While estimated tax payments are due on set dates (April 15, June 16, September 15, and January 15), withholding is treated differently. The IRS considers tax withheld from W-2 wages or IRA distributions as if paid evenly across all four quarters—or on the actual date withheld, if you so choose.
This means that if you’re short on estimated payments for the year, you may still have options:
- Have your S or C corporation pay you a year-end bonus and withhold additional taxes (though be mindful of added payroll taxes).
- Adjust withholding from a W-2 job, and document the timing for quarterly allocation. Use Form W-4 and give to your employer.
- Use an IRA “rollover and replace” strategy: take a distribution, withhold 100 percent for taxes, then redeposit the funds within 60 days to avoid tax on the withdrawal.
Example Scenario
Suppose you realize in December that you owe $10,000 in estimated taxes but have not made any payments. You withdraw $10,000 from your IRA, instructing the custodian to withhold the full amount for taxes. You then use $10,000 from your savings to redeposit into the IRA within 60 days. The $10,000 withheld is treated as paid evenly throughout the year, eliminating any underpayment penalty, and the IRA balance remains unchanged
Each of the methods can help you meet IRS safe harbor rules and avoid penalties—often with more flexibility than standard estimated tax payments.
This is what I help my tax planning clients with throughout the year as income fluctuates in their businesses.
Need to make an estimated tax payment? Next payment is due June 16th! Here are some helpful guides on how to take care of it.
You've got this,
Kimberly
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