Common Myths and Misconceptions About Estimated Tax Payments

Estimated tax payments can be confusing, especially with so many myths floating around. Some people think they’re random or only apply to certain groups, which can lead to costly mistakes. In reality, they’re an important part of staying on top of your taxes and avoiding penalties.

Myths vs. Facts

If you’ve ever wondered whether you need to make these payments or how much to send, you’re not alone—many taxpayers struggle with this. Our article, Understanding Estimated Tax Payments for Individual Taxpayers, breaks down the basics, but here, we’re tackling some of the biggest myths to help you feel more confident about what’s required.

Myth #1: Estimated tax payments are just guesses. 

✅ Fact: Payments are based on specific guidelines—typically either 90% of your current year’s tax liability or 100% (or 110%) of the prior year’s liability. 

Myth #2: Only self-employed individuals need to make estimated tax payments. 

✅ Fact: Anyone with insufficient withholding, such as those earning investment income or pension distributions, may need to make estimated payments.

Myth #3: Estimated taxes are rigid, set in stone, and can’t be adjusted. 

✅ Fact: Payments can be recalculated if your income changes throughout the year. 

Myth #4: Estimated taxes are always due on the 15th of the month. 

✅ Fact: While payments are generally due quarterly, due dates can shift for weekends and holidays. It’s important to check the deadlines each year.

Myth #5: You can wait until April 15th to pay all your taxes at once.

✅ Fact: To prevent penalties and interest, you should understand the estimated tax payment rules and potentially pay quarterly taxes throughout the year. 

Myth #6: Tax payments made in January apply to that year’s taxes.

✅ Fact: Tax payments made in January are considered the last quarterly tax payment for the previous year. 

Make Sure You’re on the Right Track

Estimated tax payments don’t have to be overwhelming. Understanding the facts can help you avoid penalties and manage your taxes more effectively.

Not sure if you need to make estimated payments, how much you should pay, or when they're due? Your CRI advisor is here to help. Reach out to us with any questions about estimated tax requirements, payment calculations, or strategies to avoid penalties—we’re happy to walk you through it and make the process easier!