The Internal Revenue Service has released updated guidance on IRS estimated tax obligations for the 2025 tax year. Taxpayers who pay estimated taxes through timely quarterly estimated tax payments can avoid the underpayment penalty, even if they ultimately owe additional income tax when filing their federal tax return under current tax law.
The Internal Revenue Service explains that taxpayers can meet the safe harbor rule by paying either 90% of their current tax liability or 100% of the tax shown on the prior year tax return. For high-income taxpayers with adjusted gross income over $150,000—or $75,000 if married filing separately—the threshold rises to 110% of the previous year’s return.
Taxpayers who owe less than $1,000 after federal income tax withholding and credits are not subject to an estimated tax penalty. Farmers and fishermen have reduced thresholds, while a penalty waiver may be available for reasonable cause, disaster, or other unusual circumstances.
Quarterly estimated tax payments are due January 15, April 15, June 15, and September 15. Missing a quarterly payment can lead to an underpayment penalty, even if taxpayers ultimately receive a tax refund at tax time.
The IRS allows taxpayers to pay estimated amounts through several methods:
The IRS notes that taxpayers who receive income not subject to tax withholding may need to pay estimated taxes throughout the year. This includes:
Because payments must account for income tax, self-employment tax, and the alternative minimum tax, taxpayers should carefully assess their tax situation. Unequal or seasonal income may require adjusting estimated payments to ensure compliance with federal tax rules.
The IRS guidance on estimated taxes is especially relevant in 2025, as more taxpayers rely on side income, capital gains, and self-employment. The system is built on federal income tax “pay-as-you-go” rules, meaning taxpayers must make quarterly estimated payments or have enough income tax withheld to cover their tax liability.
For households, the rules apply to income tax and obligations such as self-employment tax and the alternative minimum tax. Credits like the child tax credit can reduce balances owed, but taxpayers may still need to pay in advance. Using IRS tools for calculating estimated tax payments helps confirm compliance based on the prior tax year covered.
“Income taxes are pay-as-you-go,” the Internal Revenue Service reminded taxpayers, emphasizing the need to pay estimated yearly taxes. IRS Publication 505 notes that taxpayers can avoid the underpayment penalty by following the safe harbor rule when calculating estimated tax payments based on current or prior year obligations.
The safe harbor rule provides a reliable way to avoid penalties for self-employed taxpayers, sole proprietors, or those who receive other income, such as capital gains. Making quarterly estimated tax payments helps ensure that both federal income tax and self-employment tax are covered, even when income is uneven or seasonal.
The IRS notes that taxpayers should review their federal tax return and use online tools to calculate estimated tax payments. These resources help determine if additional fees are required, particularly when obligations exceed income tax withheld, including the alternative minimum tax. In cases of unusual circumstances or when reasonable cause applies, a penalty waiver may be available to reduce the risk of an underpayment penalty at tax time.
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