2020 was the 1st year that I had to pay estimated taxes and I believe I'll be paying them again for 2021. I won't be able to get my taxes done by April 15th, but will definitely be done by May 17th. The problem is, estimated taxes are still due on April 15th. How do I make a payment without knowing what the amount is going to be? Any advice would be appreciated.
You can go through the estimated tax questions for next year before you file. When you prepare your 2020 return, we'll automatically calculate your 2021 estimated tax payments and prepare 1040-ES vouchers if we think you may be at risk for an underpayment penalty next year.
You can also calculate your 2021 estimated taxes and generate the payment vouchers by doing this:
Thanks for your reply DawnC. I may not have asked my question clearly. I won't be anywhere near completing my taxes by April 15th, which is when the 1st installment for 2021 estimated taxes is due. With that said, the program won't be able to calculate my estimated payments for 2021. Can I just make the 1st installment payment similar to what did in 2020? Once my taxes are completed and I know the actual numbers, I can then adjust my remaining 3 installment payments (up or down) based on my 1st payment amount. Does that make sense.
Yes, you can do that, but you may end up with an underpayment penalty for the first quarter of 2021 just making an estimate like that, but it is still better to do that than skip the estimated tax payment.
It may not be exact, but then you are right, you can adjust the remainder of the payments by the underpaid amount.
Thanks Gloria5200! Just so I'm clear on it...if I pay a higher amount for the Q1 payment (just to be safe), can I then send in a lower amount in Q2 and not be at risk of an underpayment for that particular quarter?
For example, let's say I owe $1000 total (4 payments of $250). If I pay $400 on my Q1 payment, can I pay just $100 for Q2 and then $250 for Q3 and $250 for Q4? I just need to make sure that the IRS won't consider the $100 for Q2 an underpayment.
One last question. If for some reason I don't end up having to pay estimated taxes in 2021 (like I did in 2020), will that Q1 payment just be applied to taxes next year...whether it's a refund or payment due?
Yes, you can overpay in the first quarter and reduce the payment in subsequent quarters, but there is no need. Your taxes are calculated as if your earnings were evenly distributed over the entire year.
If you pay estimated taxes in 2021, and you didn't have to. You will see your payment refunded to you on next years tax return.