June Estimated Tax Payments Are Just Around the Corner
Article Highlights:
- Employees
- Self-Employed Individuals
- Individuals with Sources of Income Without Withholding
- Quarterly Payments
- Underpayment Penalty
- Safe Harbor Payments
Unlike employees, a self-employed individual must estimate his or her net earnings for the year and pay taxes on a quarterly basis according to that estimate. Failure to do so will result in interest penalties.
The self-employed are not the only ones who are subject to estimated tax requirements, which also apply to anyone who has income that is not subject to withholding taxes and even to those whose taxes are not sufficiently withheld. Thus, if you have income from stock sales, property sales, investments, alimony, partnerships, S-corporations, inherited pension plans, or other sources that are not subject to withholding, you may also be required to pay either estimated taxes or an underpayment penalty. Others subject to making estimated payments are individuals who must pay special taxes such as the 3.8% tax on net investment income or the employment tax on household employees.
Although these payments are called “quarterly” estimates, the periods they cover do not usually coincide with a calendar quarter.
|
Quarter
|
Period Covered
|
Months
|
Due Date*
|
| First | January through March | 3 | April 15 |
| Second | April and May | 2 | June 15 |
| Third | June through Augus | 3 | September 15 |
| Fourth | September through December | 4 | January 15 |
An underestimate penalty won’t apply if the tax due on a return (after withholding and refundable credits) is less than $1,000; this is the “de minimis amount due” exception. When the tax due is $1,000 or more, underpayment penalties are assessed.
These underpayment penalties are determined on a quarterly basis, so an underpayment in an earlier quarter cannot be made up for in a later quarter; however, an overpayment in an earlier quarter is applied to the following quarter.
The amount of an estimated payment is determined by estimating one fourth of the taxpayer’s tax for the entire year; the projected tax is paid in four installments. When the income is seasonal, sporadic, or the result of a windfall, the IRS provides a special form, and the underpayment penalty is based on actual income for the period.
For individuals who do not want to take the time to estimate their quarterly taxes but who still want to avoid the underpayment penalty, Uncle Sam also provides safe-harbor estimates.
However, even these can be tricky. Generally, a taxpayer can avoid an underpayment penalty if his or her withholding and estimated payments are equal to or greater than:
- 90% of the current year’s tax liability or
- 100% of the prior year’s tax liability.
- 90% of the current year’s tax liability or
- 110% of the prior year’s tax liability.
This office can assist you in estimating payments, adjusting withholding, and setting up safe-harbor payments. Please call for assistance.
Want tax & accounting tips and insights?
Sign up for our newsletter.
Comprehensive Business Accounting Services
For business in Chicago and the surrounding areas, we provide an integrated set of services that work together to help you grow your business.
-
Bookkeeping and Financial Reporting
-
Reliable, organized books are the backbone of good decision-making. We maintain accurate records, prepare meaningful financial statements, and help you read the story your numbers are telling.
-
Business Tax Preparation & Tax Planning
-
As a CPA for small businesses, we prepare tax returns for sole proprietorships, partnerships, S corporations, and C corporations with accuracy. We also help you develop a tax strategy to keep more of what you earn.
-
Payroll
-
We help you pay your team accurately and on time while staying current with federal, Illinois, and local payroll tax obligations, filings, and deadlines, so payroll is one less thing to worry about.
-
Business Consulting
-
Good accounting shows where your business stands; a good consultant helps you decide where to take it next. From entity selection to expansion planning, we're a steady financial sounding board for the decisions that shape your company's future.
Why Chicago Businesses Choose Serenity
Because we operate as an integrated tax and wealth practice, our business accounting services align with the broader financial decisions that matter to you and your company. When your business tax strategy connects to your personal financial landscape, you will be able to make decisions with fewer blind spots.
Clients near Chicago and across the country turn to Serenity Tax & Accounting for support that is comprehensive, coordinated, and proactive. We believe accounting should bring you clarity. We pride ourselves on calm communication, plain-language explanations, and responsive service throughout the year, not just during tax season.
When you work with our firm, you're building a relationship with a team that understands your business, anticipates what's coming, and helps you move forward with confidence.
Frequently Asked Questions
-
Software is a tool, not a substitute for judgment. A CPA reviews your books, catches errors, prepares accurate statements, and finds tax savings the software won't flag. We work alongside the system you already use.
-
Ideally, well before tax season. The biggest savings come from year-round planning, not filing-time scrambling. We work with you throughout the year, so there are no surprises in the spring.
-
As an integrated division of Serenity Wealth Management, your accounting, tax strategy, and broader financial goals work together, keeping your business and personal decisions aligned with fewer blind spots.
-
We support Chicago-area sole proprietorships, partnerships, LLCs, S corporations, and C corporations, tailoring our bookkeeping, payroll, and tax services to the size and complexity of your business.