What Happens if You Miss a Quarterly Estimated Tax Payment?

If you miss a quarterly estimated tax payment, you may need to pay penalties and interest. Estimated tax payments are due each quarter for federal and state income taxes. Also, they are used to pay self-employment tax. Most people who work as an employee for someone else have their taxes deducted from their paycheck, which means they are subject to withholding. If you are not having enough withheld, usually the easiest way to correct this is to update Form W-4 with your employer. However, independent contractors and other self-employed individuals do not have a way to have their income and self-employment taxes withheld or deducted from their pay. They must make quarterly estimated tax payments to the IRS and the state. If you owe taxes and do not pay your estimated quarterly taxes on time, you may be charged a penalty and interest even if overall you end up with a refund.

Federal Estimated Quarterly Tax Payments

The easiest way for self-employed individuals to calculate their federal estimated quarterly tax payments is to prepare an estimated tax return for that year. This is something your accountant can complete for you. If your income changes drastically throughout the year, either increases or decreases, you will need to update your estimated tax return, so your estimated quarterly tax payments can be adjusted accordingly. If you are subject to withholding from your pay and find out you are not having enough withheld, the easiest way for most people to catch up is to update Form W-4 with their employer and have an additional amount withheld from each paycheck.

During most tax years, federal estimated quarterly tax payments are due on April 15, June 15, September 15, and January 15 as outlined below:

• For the period January 1 - March 31, the due date is April 15;
• For the period April 1 - May 31, the due date is June 15;
• For the period June 1 - August 31, the due date is September 15; and
• For the period September 1 - December 31, the due date is January 15 of the following year.

If the due date falls on a Saturday, Sunday, or legal holiday, your quarterly payment will be due on the following business day.

Also, you can skip the January 15 quarterly payment if you file your tax return and pay all the taxes that are due by February 1. Most people will not have all their tax forms in time to complete their tax returns by February 1, so it is best to make the last estimated tax payment on January 15. For additional information on federal estimated quarterly tax payments, see IRS Publication 505. The most current released year for 2020 can be accessed here.

Finally, your federal estimated quarterly payments can be made online here or by mail. If you mail your payment to the IRS, make sure to include your voucher, so the payment will be applied correctly.

Ohio Estimated Quarterly Tax Payments

The easiest way for self-employed individuals to calculate their state estimated quarterly tax payments is to prepare an estimated state tax return for that year. This task is something your accountant can complete for you. If your income changes drastically throughout the year, whether it increases or decreases, you will need to update your estimated state tax return, so your estimated quarterly state tax payments can be adjusted accordingly. If you are subject to withholding from your pay and find out you are not having enough withheld, similar to federal withholding adjustments, the easiest way for most people to catch up on their Ohio State tax is to update Ohio Form IT-4 with their employer and have an additional amount withheld from each paycheck.

The Ohio Department of Taxation advises taxpayers to make estimated quarterly tax payments for Ohio state income taxes if, after credits, you expect to owe more than $500. Like federal estimated quarterly tax payments, if you are subject to Ohio withhold (meaning money is taken out of your paycheck for Ohio state income taxes), generally, you do not need to do anything. However, if you are self-employed, not having enough state taxes withheld, or having taxes withheld for the wrong state, you may need to make estimated quarterly tax payments to the Ohio Treasurer of State.

During most tax years, estimated quarterly state tax payments in Ohio are due on April 15, June 15, September 15, and January 15 as outlined below:

• For the period January 1 - March 31, the due date is April 15;
• For the period April 1 - May 31, the due date is June 15;
• For the period June 1 - August 31, the due date is September 15; and
• For the period September 1 - December 31, the due date is January 15 of the following year.

If the due date falls on a Saturday, Sunday, or legal holiday, it will be due the following business day.

For the State of Ohio when you complete your estimated state and local tax returns, you will receive two vouchers: the IT 1040 ES voucher for your estimated state income tax payment and the SD 100ES voucher for your estimated school district tax payment. You can make your Ohio State estimated quarterly tax payment online here or by sending it in the mail. If you mail it, make sure to include your vouchers with your payment, so your payment is applied correctly.

The Bottom Line

If you are self-employed or enough tax is not withheld from your pay, you may need to make quarterly estimated tax payments to both the IRS and state. For people subject to withholding from their pay, the easiest way to correct the amount is to update Forms W-4 for federal tax withholding and IT-4 for Ohio State withholding with their employer and have an additional amount withheld. If you are self-employed, you will need to complete estimated tax returns for federal, state, and local for the current tax year to determine the amount of your estimated quarterly tax payments. Once you complete the estimated tax return, you will be able to print out vouchers to mail in with your payments or you can make them online. To review if you are having enough withheld and determine if you need to make quarterly estimated tax payments, schedule an appointment today with the accounting and tax preparation professionals at Gudorf Tax Group.