Federal and California income taxes are pay-as-you-go, meaning taxpayers need to pay most of their tax during the year as income is earned or received. For those taxpayers who are employed by someone else, taxes are normally paid throughout the year by withholding tax from paychecks. However, for taxpayers who earn or receive income that is not subject to tax withholding, such as self-employed people or independent contractors, quarterly payments to the IRS and FTB are required.
Federal quarterly estimated payments should be based on the income you expect to earn and any credits you expect to receive during the year on the following schedule:
- April 15
- June 15
- September 15
- January 15 of the following year
If these due dates fall on a Saturday, Sunday, or legal holiday, the payments are due the next business day. Therefore, the tax payment due January 15, 2023 must be paid on or before January 17.
For California income taxes, the schedule is 30% by April 15, 40% by June 15, and 30% by January 15 of the following year. No payment is due in September.
Figuring the Amount Due
To figure the amount of your estimated tax payment, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. The IRS has a helpful worksheet in Form 1040-ES. You need to estimate the amount of income you expect to earn for the year; however, Form 1040-ES can be used quarterly to re-estimate the tax payment due for the next quarter, if your income varies. The goal is to estimate your income as accurately as you can to avoid underpayment penalties.
For California, use the Estimated Tax Worksheet in the Instructions for Form 540-ES to calculate your estimated tax.
How to Pay the Tax
You may send estimated tax payments with Form 1040-ES of Form 540-ES by mail or you can pay online. The IRS also allows payment by phone or from your mobile device using the IRS2Go app. Both the IRS and FTB allow for estimated tax payments to be made through your online account, where you can see your payment history and other tax records.
For More Information
Estimated tax requirements are different for farmers, fishermen, and certain higher income taxpayers. Publication 505, Tax Withholding and Estimated Tax, provides more information about these special estimated tax rules, as well as providing additional detailed information on how to figure and pay estimated taxes.