The quarterly federal estimated tax payments are required for taxpayers that earn income that isn’t subject to federal income taxes.
However, if you have income that’s not earned income such as employment or offering your services as an independent contractor, you may not be required to pay quarterly estimated tax payments. For example, if you’re earning income through selling your investment such as stocks, bonds, or real estate, you’ll pay capital gains tax, not income tax. Learn more about capital gains taxes.
Who pays quarterly taxes?
Anyone that’s earning income that isn’t subject to federal income tax withholding is generally required to estimate taxes and pay the IRS. Employees don’t pay quarterly taxes because they pay their income tax through federal income tax withholdings through their employer when payroll is processed.
Self-employed individuals, on the other hand, pay quarterly taxes by estimating their tax liability. Forms 1099 are a great way to calculate gross income for the quarter and pay taxes accordingly as it reports the total amount earned. Now that you have the answer to how do you know if you have to pay quarterly estimated taxes, let’s move on to how to pay quarterly taxes.
Pay quarterly taxes by money or check order
Pay quarterly taxes by making the money order or check order payable to the US Department of Treasury. Tell the cashier it’s for taxes. There is no need to specify the type of tax payment. The money order or check order needs to include the following information about you and taxes.
- Social Security Number
- Full Name
- Tax year
- Daytime phone number
- Related tax form or notice number (Form 1040-ES for estimated taxes)
If your tax return is joint with your spouse, include the first SSN shown on the return.
Pay quarterly taxes online
The IRS accepts electronic payments only directly from bank accounts. If you don’t have an option to pay using your bank account and want to pay taxes with a debit or credit card, use the payment processors that work with the IRS.
The payment processors charge a fee depending on the payment method – debit or credit. For debit cards, the processing fee is between $2 and $5, whereas it’s 1 to 2 percent of the tax payment for credit cards. The processing fees vary depending on the payment processor, and the fees are updated throughout the year. When it’s tax season, the fees are higher. So, you might want to position yourself to pay taxes through Direct Pay or pay with a debit card rather than a credit card as a $2,500 tax payment would mean paying at least $25 to $50 in fee alone.