The agency charges interest on penalties, which gets accrued for tax underpayment.
Estimated tax payments for the second quarter of 2025 are due on Monday, June 16, with taxpayers who fail to pay on time facing underpayment penalties, the Internal Revenue Service (IRS) said in a June 6 statement.
Taxes have to be paid throughout the year on a pay-as-you-go schedule. One way to do this is by withholding taxes from wages, pensions, or government benefits such as social security. The second way is to make estimated tax payments on a quarterly basis.
“Taxpayers that receive income not subject to withholding, such as income from self-employment, gig work, interest, dividends, capital gains, rent, or 1099 earnings, may need to make estimated tax payments throughout the year,” said the agency. “This includes freelancers, retirees, investors, businesses, and corporations.”
Estimated taxes are applicable to taxpayers such as sole proprietors, partners, and S corporation shareholders who expect to have tax liabilities of at least $1,000 in a tax year. For corporations, taxes are applicable if they expect to owe at least $500.
Among individuals, estimated tax payments must be made by people earning money through gig work, sale of goods and services, or freelance work.
Individuals whose incomes are being withheld may also be required to make the quarterly estimated tax payment if sufficient taxes are not being withheld from their wages. To prevent this situation, employed individuals can ask employers to withhold a larger amount from their income.
“Paying on time helps taxpayers avoid falling behind on their taxes and possible underpayment penalties,” the agency said.
IRS calculates penalties after taking into consideration factors such as the amount of tax underpayment and when the tax was originally due. The agency also charges interest on penalties.
In some cases, the agency may offer to remove or reduce the penalty in case the tax underpayment “is the result of a casualty, local disaster, or other unusual circumstance when it would not be fair to impose the penalty,” the IRS said.
