05/08/2026
Did you receive a notice from IRS for Underpayment of Estimated Taxes?
Estimated Tax Payments have been around since around a long time. Recently, the IRS has started enforcing the law for estimated tax payments..
Estimated Taxes: Estimated taxes are prepayments of income tax made throughout the year to cover taxes on income not subject to withholding, such as self-employment or investment income.
Penalties: Failure to pay estimated taxes when required may result in penalties and interest from the IRS.
When To Pay: Estimated tax payments are typically due quarterly, with deadlines spaced throughout the year.
So, if you’ve ever been surprised by a large tax bill or penalty, understanding estimated taxes can help you plan better for the future and avoid repeating that situation.
Let’s start with the basics. Most workers have a portion of their wages withheld every time they get paid in order to cover their income taxes for the year. But what are self-employed people and small businesses supposed to do? Enter estimated taxes.
When you think about it, getting paid only once a year would create all sorts of financial complications for anyone. The IRS feels the same way, which is why it requires these quarterly payments to ensure a steady revenue stream throughout the year. These taxes apply to income sources such as:
Self-employment earnings (e.g., freelance or contract work).
Interest and dividends.
Rental income.
Capital gains.
Alimony (only in applicable cases).
