How to Report Estimated Tax Payments on Your Return

Introduction

If you are self-employed, an independent contractor, or earn non-W-2 income, you may be
required to make estimated tax payments throughout the year. Under IRC § 6654, the IRS requires
taxpayers to pay taxes quarterly if they expect to owe at least $1,000 in federal taxes when filing
their return.

Failing to report estimated tax payments correctly can lead to penalties and interest. This guide
explains who must make estimated payments, how to report them, and IRS filing requirements for
2025.

Who Needs to Make Estimated Tax Payments?

You must make quarterly estimated payments if you:

•  Are self-employed, a freelancer, or an independent contractor
•  Receive rental income, dividends, capital gains, or business income
•  Expect to owe at least $1,000 in federal taxes after credits and withholding
• Have minimal or no federal tax withheld from income sources

Exceptions to Making Estimated Tax Payments

•  If your total federal tax due is less than $1,000
•  If your withholding and refundable credits cover at least 90% of your tax liability
• If you had no tax liability in the prior year

How to Calculate Estimated Tax Payments

Step 1: Estimate Your Taxable Income

• Add up self-employment income, business revenue, rental earnings, dividends, and capital
  gains.
• Deduct business expenses and eligible tax credits.

Step 2: Use IRS Form 1040-ES to Calculate Payments

• The IRS provides a worksheet on Form 1040-ES to help taxpayers determine their quarterly
  payments.
• Self-employed individuals must include self-employment tax (15.3%).

Step 3: Pay Estimated Taxes Quarterly

•  Payments are due on the following dates:

How to Report Estimated Tax Payments on Your Tax Return

Step 1: Gather Proof of Payments

• Collect payment confirmation receipts from IRS Direct Pay, EFTPS, or checks.

Step 2: Enter Payments on Form 1040

•  Report total estimated tax payments on Line 26 of Form 1040.
•  If self-employed, also complete Schedule SE (Form 1040).

Step 3: Claim Overpayments or Adjustments

•  If you overpaid estimated taxes, the excess will be refunded or applied to next year’s taxes.

IRS Forms & Compliance Checklist

•  Form 1040 – Report estimated tax payments (Line 26)
•  Form 1040-ES – Calculate and pay estimated taxes
• Schedule SE (Form 1040) – Report self-employment tax

Conclusion

If you earn income without tax withholding, making and reporting estimated tax payments
correctly helps you avoid penalties and IRS audits. By paying on time and tracking payments, you
can reduce tax liability and prevent interest charges.

For expert tax assistance, schedule a consultation with Anshul Goyal, CPA EA FCA, a licensed tax
professional and IRS representative.

Frequently Asked Questions (FAQs)

1. What happens if I don’t make estimated tax payments?
The IRS may charge penalties and interest on unpaid taxes.

2. How do I pay estimated taxes?
Payments can be made via IRS Direct Pay, EFTPS, check, or debit/credit card.

3. Can I adjust estimated tax payments later?
Yes, if your income changes, you can increase or decrease payments.

4. Do I need to file Form 1040-ES?
No, but it helps you calculate and track payments.

5. What if I overpay estimated taxes?
You can apply the overpayment to next year’s taxes or request a refund.

About Our CPA

Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant and an IRS Enrolled Agent (EA).
He specializes in self-employment tax planning, estimated tax payments, and IRS compliance.

Schedule a consultation today with Anshul Goyal, CPA, to avoid tax penalties and optimize your tax
strategy.