Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments.

Estimated taxes are quarterly income tax payments, due to the Internal Revenue Services, and possibly your States Department of Revenue, based on your earned income.

If the amount of income tax withheld from your salary is not enough, or if you receive income such as interest, dividends, capital gains, self-employment income, or prizes, you may have to make estimated tax payments.

If you are in business for yourself, you generally need to make estimated tax payments to cover both income and self-employment tax.

If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty, even if you are due a refund when you file your tax return.

Read the IRS Guidance on Estimated Taxes to learn more.