The agency has reminded taxpayers that although the tax filing deadline was pushed to May 17, estimated tax payments are still due April 17.
The Internal Revenue Service has reminded self-employed individuals, retirees, investors, businesses, corporations, and others who pay their taxes quarterly that the payment for the first quarter of 2021 is due Thursday, April 15, 2021.
The agency has clarified that the extension to May 17, 2021, for individuals to file their 2020 federal income taxes does not apply to estimated tax payments.
Income taxes are pay-as-you-go, which means that, by law, taxes must be paid as income is earned or received during the year. Most people pay their taxes through withholding from paychecks, pension payments, Social Security benefits, or certain other government payments including unemployment compensation.
Usually, those who are self-employed or in the sharing economy need to make estimated tax payments.
Similarly, investors, retirees, and others often need to make these payments because a substantial portion of their income is not subject to withholding.
Other income generally not subject to withholding includes interest, dividends, capital gains, alimony, and rental income.
Paying quarterly estimated taxes will usually lessen and may even eliminate any penalties.
There are, however, some exceptions to the penalty and special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees, and those who receive income unevenly during the year.