Invest Wisely

How to Pay Federal Estimated Taxes Online

by Ryan Kinnar5 min read
How to Pay Federal Estimated Taxes Online

Employees may not know it but it seems that they are getting the better part of the deal when it comes to how their taxes are paid. For each pay period, the employer withholds some money from their pay check which goes to their tax contributions then all they have to do is to file on or before the IRS tax deadline for them to be able to get a tax refund. However, freelancers and small business owners do not have the same advantage since they do not have a human resource personnel to pull tax money out of their income. Small business owners have to pay four times annually for their estimated taxes. But there are ways to pay estimated taxes online.


In the United States, there is a pay-as-you-go taxation system. In the same way that income tax is withheld from workers in each pay period which will be sent to the IRS, the quarterly estimated tax that they pay helps the government maintain a source of income in a reliable schedule. It also protects them from having to pay a big amount of money all at once. Although it might require some extra work, filing your estimated taxes quarterly actually helps you manage your taxes better.



What Are Estimated Taxes?

For those who are fully employed, the employer has the responsibility to withhold federal, state, and local taxes from their employee’s paycheck and send that amount to the IRS as well as to the corresponding state and locality if any. Those payments are what is expected of your tax liability when you are ready to file your tax return. This information is included in your Form W-2 for the year.


If the amount you prepaid is more than what you have to when you file, you will get the extra back in the form of a tax refund. However, if you paid too little, you would need to pay for the difference. Your withholding tax is based on the Form W-4 that is most recent that is with your HR department. Small business owners however, would need to file on their own and send regular payments to the IRS.


As a self-employed earner, since no income tax is being automatically paid, you may need to pay in estimates. This is called estimated taxes and paying it requires that you estimate how much you would have to pay in advance for the current year. You would have to send in these payments quarterly in amount that would equal the total of that estimate. Those quarterly payments have due dates and it is usually near the middle of April, June, September, and January.



If these estimated tax payments are not paid quarterly, you may be given a penalty by the IRS for failure to pay estimated taxes. You could avoid these penalties by being aware of your responsibility to pay estimated taxes and how to compute for the amount as well as paying them efficiently. One of the ways to do this is to pay taxes online.


Steps to Pay Taxes Online

Those who are required to pay estimated taxes online fall into two categories. One is the self-employed full-time workers and the small business owners. They would have to pay taxes online on a regular basis.


Freelancers with a regular job that automatically withholds taxes also have to do this. Those who have full-time jobs and also work on the side as freelancers would have to determine how much of their overall income is not taxed. Then, they would have to pay the estimated taxes for their freelance work especially if it constitutes a significant portion of their income. The basic rule is that if the freelancing income is less than 10% of the gross income, it may not be required to pay estimated taxes.


There are a variety of options of paying estimated taxes. Aside from mailing the payment, you can pay taxes online using a debit or credit card. You can also use the EFTPS system. There are no fees but you would have to enroll with your payment method. It’s quite easy and all you need is your SSN and a mailing address.