If you earn money and taxes are not withheld when you’re paid, you’ll probably have to pay quarterly estimated taxes to the IRS in 2020.
Most people with traditional W-2 jobs won’t have to worry about paying estimated taxes. But self-employed individuals typically must pay quarterly estimated taxes on a schedule established by the IRS. So must those who bring in income from interest, dividends, or capital gains.
What are the tax quarters?
Common sense would tell you that each of the quarters of our twelve-month calendar contains an equal number of months. But that would be far too simple.
Instead, the IRS makes the second quarter rather short. To make up for that fact, the fourth quarter is longer.
First Quarter – For quarterly estimated tax purposes, the first quarter of a calendar year is made up of January, February, and March.
Second Quarter – For quarterly estimated tax purposes, the second quarter of a calendar year is made up of April and May.
Third Quarter – For quarterly estimated tax purposes, the third quarter of a calendar year is made up of June, July, and August.
Fourth Quarter – For quarterly estimated tax purposes, the fourth quarter of a calendar year is made up of September, October, November, and December.
Here are the quarterly estimated tax payment due dates for 2020:
April 15, 2020: Income tax due date AND the due date for your first quarterly estimated tax (QET) payment. In April, you’ll pay QET on the income you made in January, February, and March 2020.
June 15, 2020: This is when you’ll pay QET on the income you made in April and May 2020.
September 15, 2020: QET for the months of June, July, and August 2020 are due on this date.
January 15, 2021: QET for the months of September, October, November, and December 2020 are due on this date.
Those who make at least two-thirds of their income from farming or fishing only have to make one estimated payment for the entire 2020 tax year, due January 15, 2021. If you are in this boat but file and pay your 2020 taxes in full by March 2021, you won’t be penalized if you don’t make an estimated payment in January, either.
|January 31, 2020||1099- MISC due to Contractors|
|February 28, 2020||1009- MISC due to IRS for each contractor|
|March 16, 2020 March 31, 2020||S Corporation Tax 1099- MISC due to IRS for each contractor if filing electronically|
|April 15, 2020||Personal Income Tax|
|April 15, 2020||Quarterly Estimated Tax|
|June 15, 2020||Quarterly Estimated Tax|
|September 15, 2020||Quarterly Estimated Tax|
|January 15, 2021||Quarterly Estimated Tax|
The IRS tax calendar has all the dates you’ll need and more.
In Google Calendar (or calender of choice), you can also subscribe to the IRS Tax Calendar for Businesses and Self-Employed.
Income tax dates
Depending on your business structure, your filing date may sneak up before April. You may need to file in March. Here’s how to figure it out:
March 16, 2020: Tax due date for “S” corporations and corporations. It comes a full month before the typical income tax due date.
April 15, 2020: Your personal income tax is due on this day; so is your sole-proprietor or a single-member LLC income tax.
Penalties for Missing Estimated Quarterly Tax Payments
If you don’t pay your estimated quarterly taxes, you could end up paying a penalty. There are a few outs, though.
- If you end up owing less than $1,000 at the end of the year, you will not be subject to penalties.
- You’ll be exempt from penalties under safe harbor if the total payments you made throughout 2020 were equal to or more than 90% of your 2019 tax burden. Alternatively, if your 2020 payments add up to 100% or more of your 2018 tax bill, you won’t be held accountable for penalty fees.
- Safe harbor rules are different if you’re bringing in a higher income. If you made north of $150,000 in 2018, your 2020 quarterly payments must add up to 110% of your 2018 tax burden in order to dodge these fees.
If you run a seasonal business, you don’t necessarily have to save for quarterly taxes during months where you do not bring in an income. If you don’t make any money through March, you won’t have to make a payment in April. Then, as business picks up, pay your quarterlies as you bring in that revenue.
State Quarterly Estimated Tax Payments
Remember that the IRS only covers federal taxes. You will also have to file QET payments with your state. In the most ideal situation, you have a pass-through business and live in a state without income taxes, eliminating the need to file. In the worst-case scenario, you live in a state where your income is taxed but filing dates or rules regarding your business structure vary for tax purposes.
Estimating your taxes isn’t easy, but making these payments as you go can save you a huge headache and tons of money in fees as you progress throughout the year.
This information is for educational purposes only. Always consult an accountant or tax professional for information tailored to your specific business.