If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The fourth quarter due date for the 2025 tax year is on or before Thursday, January 15, 2026.

You are required to withhold at least 90% of your 2025 tax obligation or 100% of your 2024 federal tax obligation. If your income is over $150,000 ($75,000 if married filing separately), you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty. A quick look at your 2024 tax return and a projection of your 2025 tax return can help determine if a payment is necessary.

Considerations when paying estimated taxes for the fourth quarter

1. If you do not have proper tax withholdings, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. So a fourth-quarter catch-up payment may not help avoid an underpayment penalty if you didn’t pay enough taxes in prior quarters.
2. For self-employment taxes, you must remember to also pay your Social Security and Medicare taxes, not just your income taxes. Creating and funding a savings account for this purpose can help you avoid a cash-flow hit each quarter when you pay your estimated taxes.
3. Don’t forget state obligations! With the exception of a few states, you are often required to make estimated state tax payments when required to do so for your federal tax obligations. Consider conducting a review of your state obligations to ensure you meet these quarterly estimated tax payments as well.

What to do if you miss a quarterly estimated tax payment

Now is the time to plan for the fourth-quarter estimated tax payment. Taking action before the deadline can help you avoid penalties and keep your year-end tax strategy on track. If you’re reading this after the deadline, you still have options. Learn what steps to take and how to limit potential penalties in our previous post: https://rrbb.com/avoid-late-penalties-quarterly-estimated-tax-payment/

If you have any questions or concerns regarding your tax situation, please contact RRBB Advisors.