The Internal Revenue Service (IRS) collects taxes on a pay-as-you go system, meaning taxes must be paid when income is earned. For those who are small business owners or self-employed individuals whose income is not subject to withholding tax, you may have to pay the quarterly estimated taxes to avoid underpayment penalties and interest.
September 15th marks the 3rd of four estimated tax deadlines throughout the tax year.
Am I required to pay estimated taxes?
In general, you must pay estimated taxes if you expect to owe the government at least $1,000 ($500 for corporations) in tax during the year.
For more information, visit and read our dedicated blog on Estimated Quarterly Tax Payment Reminders.
What if I Missed the Deadline?
Missing a tax deadline can lead to financial consequences. The IRS may impose penalties and interests on the unpaid taxes.
Last August 25, 2023, the IRS announced an increase in interest rates starting October 1, 2023. For individuals, the new rate for overpayments is now 8% (from 7% last quarter), compounded daily. This rate also applies to estimated tax underpayments for the fourth calendar quarter beginning October 1, 2023. This means a higher interest rate on unpaid estimated taxes on top of penalties.
Below is the complete list of the new rates:
- 8% for overpayments (payments made in excess of the amount owed), 7% for corporations.
- 5.5% for the portion of a corporate overpayment exceeding $10,000.
- 8% for underpayments (taxes owed but not fully paid).
- 10% for large corporate underpayments.
Need help with your taxes? Contact us toll-free (855)529-1099 or make an appointment and let our tax experts guide and help you stay compliant with the IRS’ tax rules and regulations.
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