Estimated Tax Payments

Income tax is considered a pay-as-you-go tax, which means that tax must be paid as you earn or receive income during the year. You can either do this through withholding or by making estimated tax payments. Therefore, if you are self-employed or have additional sources of income outside of your regular job, you may be required to pay your Federal taxes four times annually.

To avoid penalties, make estimated payments in four installments equal to 90% of your 2021 tax liability or 100% of what you paid in 2020. If the AGI on your prior year’s return was more than $150,000 ($75,000 if married filing separately), the percentage requirement increases to 110% of 2020 tax or 90% of 2021 tax, whichever is lower. The minimum threshold for paying estimated tax remains at $1,000 for 2021.