Estimated taxes are payments made to the Internal Revenue Service (IRS) by individuals and businesses who must pay their taxes in installments throughout the year, rather than in one lump sum when they file their tax return. These payments are typically required for individuals and businesses who expect to owe at least $1,000 in taxes for the year and will not have enough taxes withheld from their wages or other income.

The concept of estimated taxes is outlined in the Internal Revenue Code (IRC) Section 6654, which establishes the general rules for determining the liability of an individual or a business for estimated taxes. According to this section, the individual or business must make estimated tax payments in four equal installments throughout the year on specific due dates. If the individual or business does not make the payments on time, they may be subject to penalties and interest.

One of the key provisions of IRC Section 6654 is the safe harbor provision, which provides a way for individuals and businesses to avoid penalties for underpayment of estimated taxes. According to this provision, as long as the individual or business pays at least 90% of their total tax liability for the current year or 100% of their total tax liability for the previous year, whichever is smaller, they will not be subject to penalties for underpayment.

Another important provision of IRC Section 6654 is the special rule for farmers and fishermen, which allows these individuals to make their estimated tax payments on a different schedule than other taxpayers. According to this provision, farmers and fishermen may make their estimated tax payments on the last day of the tax year, instead of in four equal installments throughout the year.

In addition to IRC Section 6654, the concept of estimated taxes is also addressed in other sections of the Internal Revenue Code. For example, IRC Section 6015(c) provides an exception to the general rule for married individuals who file separate returns. According to this section, if both spouses are liable for the same tax, either spouse can make the estimated tax payments and be credited with the payments made by the other spouse. IRC Section 6654(e) also provides an exception for individuals who retire after age 62 or become disabled. According to this section, these individuals may be able to make their estimated tax payments at a slower pace, based on their income and other factors.

In conclusion, estimated taxes are payments made to the Internal Revenue Service (IRS) by individuals and businesses who are required to pay their taxes in installments throughout the year, rather than in one lump sum when they file their tax return. These payments are typically required for individuals and businesses who expect to owe at least $1,000 in taxes for the year and who will not have enough taxes withheld from their wages or other income. The concept of estimated taxes is outlined in the Internal Revenue Code (IRC) Section 6654, which establishes the general rules for determining the liability of an individual or a business for estimated taxes. According to this section, the individual or business must make estimated tax payments in four equal installments throughout the year on specific due dates. Other sections of the Internal Revenue Code such as IRC Section 6015(c) and IRC Section 6654(e) also provide exceptions for certain taxpayers.

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