Forgot an Estimated Tax Payment? Here’s How to Get Back on Track

Failing to make an estimated tax payment can lead to penalties and added stress. If you’ve missed a payment, don’t panic—there are ways to address it and minimize the consequences. Here’s what you need to know.

Estimated Tax Payment Basics

Most taxpayers operate on a calendar year, meaning estimated tax payments are due on the following dates:

2024 Tax Year Deadlines:

• April 15, 2024
• June 17, 2024
• September 16, 2024
• January 15, 2025

2025 Tax Year Deadlines:

• April 15, 2025
• June 16, 2025
• September 15, 2025
• January 15, 2026

Timely payments help you avoid penalties, so marking these deadlines on your calendar is essential.

Best Ways to Make Payments

There are multiple methods to submit estimated tax payments. Choosing the right one depends on your convenience, security, and record-keeping preference.

1. IRS Direct Pay/IRS Online Account

• Pay directly from your bank account.
• Pros: Free, immediate confirmation, easy to schedule payments.
• Best for: Taxpayers seeking a simple, fast, and secure option.

2. Electronic Federal Tax Payment System (EFTPS)

• Register at EFTPS.gov and make electronic payments.
• Pros: Free, allows advance scheduling, detailed payment history.
• Best for: Those who need a robust tracking system.

3. IRS2Go Mobile App

• Make payments via Direct Pay or credit/debit card.
• Pros: Secure and convenient for mobile users.
• Best for: Taxpayers who prefer mobile transactions.

4. Credit/Debit Card or Digital Wallet

• Pay through an IRS-approved payment processor.
• Pros: It can be helpful for cash flow and earning credit card rewards.
• Cons: Processing fees apply.
• Best for: Those who prefer credit card payments despite fees.

5. Check or Money Order

• Mail Form 1040-ES along with a check or money order.
• Pros: Familiar method for those uncomfortable with online payments.
• Cons: Processing delays, risk of lost mail, no immediate confirmation.
• Best for: Taxpayers without internet access or those who prefer traditional methods.

IRS Direct Pay and EFTPS are the best options for most individuals due to their security, ease of use, and free processing.

Understanding the Insufficient Estimated Tax Penalty

You may face a non-deductible penalty if you don’t make sufficient estimated tax payments on time. This applies to self-employed individuals, S corporation owners, and those with substantial untaxed income sources like rental or investments.

Penalty Rates

• The penalty rate for insufficient estimated payments fluctuates.
• For the fourth quarter of 2024, the rate is 8 percent.
• For the first quarter of 2025, the rate decreases to 7 percent.

Since the penalty is non-deductible, it effectively costs more than it seems—particularly for high-income taxpayers.

How the IRS Calculates the Penalty

The penalty period starts on the due date for a missed payment and ends when the amount is paid or by April 15 of the following year—whichever comes first. You can calculate the penalty using IRS Form 2210, or the IRS will do it and send you a bill.

Example: Missed Payment and Catch-Up

• Your required quarterly estimated tax payment is $20,000.
• You made the first and second payments on time but missed the third payment, due September 16, 2024.
• If you pay the $20,000 on December 5, 2024, the penalty stops accruing on that date.
• If you wait until January 15, 2025, to pay $40,000 (catching up for the next quarter), you’ll owe penalties on the $20,000 from September 16 to January 15.
• If you don’t pay until after April 15, 2025, the penalty stops, but you may also face a failure-to-pay penalty of 0.5 percent per month.

How to Avoid or Minimize the Penalty

The IRS allows certain exceptions to avoid or reduce underpayment penalties.

Exception 1: Current-Year Tax Exception

• No penalty applies if you pay at least 90 percent of your total tax liability for the current year via estimated tax payments.
• Payments must be made on time at roughly 22.5 percent of the total tax per quarter.

Exception 2: Prior-Year Tax Exception

• No penalty applies if you pay 100 percent of last year’s tax liability (110 percent if your AGI exceeds $150,000).
• Requires making cumulative payments as follows:
  • 25% (or 27.5%) by first quarter
  • 50% (or 55%) by second quarter
  • 75% (or 77.5%) by third quarter
  • 100% (or 110%) by fourth quarter

Exception 3: Annualized Income Method

• If your income is seasonal or uneven, this method may allow you to avoid penalties by making payments based on your actual earnings per quarter.
• This approach is complex—consider using IRS Form 2210 or hiring a tax professional.

Special Rules for Farmers and Fishermen

Farmers and fishermen have unique estimated tax requirements. See IRS Form 2210-F for details.

Conclusion

Staying on top of estimated tax payments is crucial to avoiding unnecessary penalties. Choosing secure and efficient payment methods like IRS Direct Pay or EFTPS ensures timely compliance. Making a catch-up payment as soon as possible will minimize penalty accrual if you miss a payment. Additionally, understanding and leveraging penalty exceptions, such as the prior-year tax exception or the annualized income method, can help you reduce or eliminate penalties. If your income is inconsistent, consulting a tax professional can be beneficial. You can maintain compliance and prevent financial setbacks by proactively managing your estimated tax payments.