For people filing taxes using the calendar year, the third quarter comprises July, August and September and the estimated income tax payments to the Internal Revenue Service are due on Sept. 15 each year. If you use a fiscal year rather than a calendar year, the payments are due on the 15th of the ninth month of your fiscal year.
What Are Quarterly Tax Payments?
The federal tax system is a pay-as-you-go tax system, meaning that as you earn the money, you must pay taxes on it rather than waiting until the end of the year and making a one-time, lump sum payment. If you anticipate owing more federal taxes that you have withheld from your paycheck, you need to make separate payments to the IRS to avoid income tax interest and penalties.
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Who Makes Quarterly Tax Payments?
Most often, quarterly taxes are paid by people who work as independent contractors or who have their own business because they do not have taxes withheld from their paychecks by their employers. However, if you have significant investment or interest income, you may need to make estimated payments because no money is withheld from those profits. For example, if you have a third of your income from your stock investments and dividend income, you would likely need to make estimated payments.
How Much to Pay
The IRS allows taxpayers to select from several methods to determine the amount you need to pay in quarterly taxes. You can use the estimated taxes you will owe based on what you think you will make during the current year. As long as you pay at least 90 percent of what you owe, you will not owe additional penalties. However, if your income increases unexpectedly and you do not meet the 90 percent threshold, the IRS will charge interest and penalties. Therefore, most people elect to withhold based on their previous year's information. If your adjusted gross income was less than $75,000, your quarterly payments must equal the amount of taxes you owed for the previous year. If your AGI is more than $75,000, your quarterly payments must equal 110 percent of the amount of taxes you owed for the previous year.
How to Pay
The IRS uses Form 1040-ES for people to make estimated income tax payments during the year. Within the form are four vouchers; one for each quarter. When making your third-quarter payment, be sure to use the third-quarter voucher. You can also pay online through the Electronic Federal Tax Payment System. The third-quarter payment that you make is credited against the income taxes you owe at the end of the year.