To avoid a penalty, your total tax payments (estimated taxes plus withholding) during the year must satisfy one of the requirements we just covered. You had no tax liability for the prior year if your total tax was zero or you didn’t have to file an income tax return. For additional information on how to figure your estimated tax, refer to Publication 505, Tax Withholding and Estimated Tax. Most people take the standard deduction, which is available to all taxpayers. Single taxpayers can deduct $13,850 from their gross income, up from $12,950 the previous year. A person with $63,850 in gross income, for example, can reduce their taxable income to $50,000.​ The standard deduction for couples filing jointly will rise to $27,700 in 2023, up from $25,900 the prior year.

Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. Whether or not you get a tax refund depends on the amount of taxes you paid during the year.

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As such, it is possible to underestimate, resulting in an underpayment and penalty. To avoid this penalty, you can use your previous year’s taxes as a guide. In many cases, as long as you pay 100 percent of the previous year’s tax, you won’t be subject to the penalty. If you end up overpaying, you can receive a tax refund at the end of the year or carryover the excess amount to help pay the estimated taxes for the next year.

If you don’t think you can afford your full tax bill, then you should pay as much as you can and contact the IRS. The agency may be able to offer you a few payment options to help you pay off your bill. For example, the IRS may offer a short-term extension estimated tax or temporarily delay collection. You may also have the option to pay your remaining bill over multiple installments. You will likely still pay any interest charges on overdue balances, but in some cases, the IRS may even waive penalties or fees.

What are estimated tax payments?

Unlike adjustments and deductions, which apply to your income, tax credits apply to your tax liability, which means the amount of tax that you owe. Once you have subtracted deductions from your adjusted gross income, you have your taxable income. If your taxable income is zero, that means you do not owe any income tax.

Federal and state taxes are different, with federal taxes covering nationwide programs and services, while state taxes fund state-specific needs. However, while the calculator focuses on federal taxes, TurboTax can help you with both federal and state taxes. Our tools are designed to consider the specific tax laws and provisions of each state, helping you accurately prepare both your state and federal taxes.