You may need to pay estimated taxes if you don’t have enough tax withheld from your income throughout the year. Estimated taxes help you stay current on your tax bill and avoid penalties.
When am I required to pay estimated taxes?
According to the IRS, you’re generally required to make estimated tax payments if both of the following are true:
You expect to owe $1,000 or more in federal tax for the year after subtracting withholding and credits, and
That tax isn’t being fully paid through withholding from your income
I earn W-2 income and have taxes withheld. Do estimated taxes still apply?
In many cases, no. If you earn wages reported on a Form W-2 and the right amount of tax is withheld from your paycheck, your tax payments are already being made throughout the year.
However, if your withholding is too low, it may not cover what you owe. In that case, you could be subject to underpayment penalties, and estimated tax payments may apply.
When don’t I have to pay estimated taxes?
You generally don’t have to pay estimated taxes for the current year if all of the following are true:
You had no tax liability for the prior year
You were a U.S. citizen for the entire year
Your prior-year tax return covered a full 12-month period
What if my withholding is too low?
If you know—or have confirmed with a tax professional—that your withholding won’t be enough, you’ll need to either:
Make estimated tax payments, or
Update your Form W-4 with your employer to increase withholding
Can penalties for underpayment be waived?
In some cases, the IRS may waive penalties for not paying estimated taxes if:
You couldn’t pay due to a disaster or unusual circumstance outside your control, and it would be unfair to impose a penalty, or
You acted in good faith and can show reasonable cause for not meeting your tax obligations
Key takeaway
If you expect to owe at least $1,000 in tax for 2025 that isn’t covered by withholding, you’ll generally need to pay estimated taxes to avoid penalties.
This content is provided for informational purposes only and should not be construed as tax, legal, financial, accounting, or other advice. Rules and regulations vary by location and are subject to change, so please consult with an expert if you need advice specific to you.
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