Estimated Tax Payments: How to Make Sure the IRS Gives You Credit

For business owners, self-employed professionals, investors, and retirees estimated tax payments are a routine part of staying compliant. But one overlooked issue can create major frustration: the IRS is no longer accepting checks.

The good news is the IRS won’t lose your money. The bad news is you may not remember how much you paid. The best way to start is to set up an account at www.irs.gov and login and verify your payments before you get your taxes done.

WHO NEEDS TO MAKE ESTIMATED PAYMENTS?
Estimated payments typically apply to anyone who owes more than $1,000 in taxes. The IRS charges 8% underpayment penalty if you don’t make them. When it was 3% it didn’t hurt much so a lot of people just ignored it.

How to calculate it:
– Pay 90% of what you owe this year (make a good guess)
– Pay 100% of what you owed last year (110% if you made over $150k and are married)
– Annualized installment method (for fishermen, farmers and people who had one big month of income)

Because taxes are pay-as-you-go, the IRS requires payments throughout the year — due in April, June, September, and January. Failing to pay enough throughout the year can result in underpayment penalties, even if you pay the balance in full at filing time.

WHAT IF I EXTEND MY TAXES?
You must pay 100% of your bill before April 15th. Or the IRS can charge 3 penalties:
a) Late filing (forgot to send in the extension) 5% per month up to 25%
b) Late payment 0.5% per month up to 25%
c) Interest 8% annually

VERIFY THROUGH IRS ONLINE ACCOUNT
The IRS provides online account access where you can confirm posted payments. Checking periodically can prevent surprises at filing time.

WHAT HAPPENS IF THE IRS SAYS YOU DIDN’T PAY?
Do not panic. Compare the IRS notice with your records. Confirm which tax year the IRS applied the payments to. Respond promptly with documentation if needed. Many cases are resolved quickly once proof is submitted.

STRATEGIC ESTIMATED TAX PLANNING
For business and self-employed people:
– Set aside at least 20% of your profit for Uncle Sam
– Ask your preparer for what percentage you may owe
– Put it in a separate checking account (so you don’t spend it)
– Send it in quarterly (or monthly)

Business owners especially should reassess estimated payments mid-year if profits increase significantly.

Estimated tax payments are meant to keep you compliant—not create confusion. Track carefully. Verify regularly. Plan proactively. A few extra minutes of oversight today can save you weeks of frustration tomorrow.