General

• The IRS requires that estimated tax payments for individual income tax payers be remitted via Form 1040-ES, Estimated Tax. The due dates for estimated tax payments are typically April 15, June 15, and September 15 of the tax year. A final estimated tax payment is required to be remitted by January 15 of the following year. Payments made via the United States Postal Service must be postmarked by the deadline. Payments made via private delivery services, must be received by this date.
  
  

Payment Amounts

• In general, payments for estimated income tax should be made in equivalent amounts or the largest payments should be remitted first. Typically, the IRS will access penalties and interest if these requirements are not met. One significant exception exists, however, when income is earned disproportionately in later periods. An example of this would be an investor selling stock and recognizing a large capital gain at year end. When income is earned disproportionately, the taxpayer need only pay the proportional share of income tax in a given period.
  
  

Form 2210

• When the exception for income earned disproportionately during the tax year applies, the taxpayer may have to file Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts with the individual income tax return. This form is used not only to calculate the amount of penalty, but also to show the IRS that income was earned in a disproportionate manner and that the estimated tax payments were appropriate.
  
  

Early Payment

• The IRS doesn't require all four estimated tax payments on April 15, June 15, September 15, and January 15 of the subsequent year if a sufficient prepayment of estimated income tax has been made. There are two primary ways of making this prepayment. First, taxpayers with a refund on their prior year tax return may choose to apply the refund to the subsequent year's taxes. Secondly, the first payment coupon may be remitted anytime prior to April 15. Because of the time-value of money, most taxpayers do not significantly prepay estimated taxes.
  
  

Warning

• Failure to make estimated tax payments in a timely manner may result in two types of penalties from the IRS: a failure to pay penalty and charged interest. If timely payment is greatly delayed, the failure to pay penalty can be significant. In general, a taxpayer can avoid all penalties through withholding and estimated tax payments equivalent to 90 percent of the current year tax or 100 percent of the prior year tax. For certain high-income taxpayers, however, the requirements are 90 percent of the current year tax or 110 percent of the prior year tax.