Features

• When making estimated tax payments, an individual must first estimate how much money he will earn that year and, accordingly, how much he will owe in taxes. He will then split this figure in four quarterly payments, which he must send to the Internal Revenue Service, as well as relevant state and local tax collection agencies.
  
  

Penalties

• If a person required to make estimated tax payments fails to do so, the IRS will penalize her in two ways. First, she will be required to pay interest on the amount she did not pay. Secondly, she will be hit with an additional penalty. The formula by which this penalty is calculated is complex and changes regularly.
  
  

Considerations

• In addition to the IRS assessing a penalty, state and local officials will likely also dock the taxpayer for nonpayment. Penalties vary by state. It should be noted that the IRS will not assess a taxpayer a penalty if he paid more than 90 percent of the correct amount on time.