How to prepare to pay estimated taxes

If you earn income from sources like interest, dividends, capital gains, prizes and awards, or self-employment income where taxes aren’t withheld, you may owe quarterly estimated tax payments. These payments are important to help avoid penalties for underpayment.

These payments are for each quarter of the year and are typically due on the 15th of the month after each quarter ends. You can mark your calendar accordingly:

• January 1 to March 31; due April 15

• April 1 to May 31; due June 15

• June 1 to August 31; due September 15

• September 1 to December 31; due January 15 of the following year

If these due dates fall on a weekend or federal holiday, payments are due the next business day.

Individuals generally use Form 1040-ES to calculate their estimated tax. Once you know how much you are going to owe each quarter, you can start to plan accordingly.

Looking to make sure you’re prepared for these estimated tax payments? We’re sharing some tips on how to set yourself up for success if you’re expecting to pay the same amount each quarter throughout the year.

• I want to set aside money throughout each quarter

• I want to set aside money at the start of the year

One way to make sure you have enough money to cover your estimated tax by its due date is to take the amount you owe each quarter and divide it by 13 — the number of weeks each quarter. Focus on putting this much in a high-yield savings account or money market deposit account each week throughout the quarter.

Using a platform like Raisin, you can open no-fee accounts across a network of federally insured banks and credit unions, keeping your money safe up to $250,000 per institution while earning market-leading interest rates.

Your estimated tax fund will grow throughout the quarter so, if you keep making weekly deposits, not only will you have enough to cover your bill but you should have a little left over in interest earnings to either put toward next quarter’s bill or to put toward another savings goal.

To get started, select an account below, sign up in just a few minutes, and initiate your first deposit today:

Another way to prepare your IRS estimated tax payments is to store money for them in high-yield certificate of deposits, also known as CDs.

Using Raisin, you can find a CD with a term that lines up with just before each of your quarterly estimated tax payments are due. For instance, if it’s the start of the year, you’ll want to find:

• a three-month CD to align with April estimated taxes

• a six-month CD to align with June estimated taxes

• a nine-month CD to align with September estimated taxes

• a one-year CD to align with January estimated taxes

Similarly to a CD ladder, you’ll want to deposit equal amounts into each CD. Once you deposit funds, your money will grow at a fixed interest rate — allowing you to actually have extra money to pay estimated tax payments once each due date comes around.

Plus, with funds subject to early withdrawal penalties if accessed prior to maturity, you’ll still be able to access your money in case of emergency but otherwise can limit your temptation to spend it.

Then, as your CDs mature, you’ll be able to pay your estimated tax payments — plus you’ll have a little extra in interest earnings to treat yourself or put toward one of your savings goals.

On the Raisin platform, finding CDs that align with your specific timelines is simple. All of the CDs on the Raisin are offered by federally insured banks and credit unions, meaning your funds remain secure up to $250,000 per depositor, per institution. For joint accounts, this increases coverage by $250,000 per co-owner for a total of $500,000 per institution. 

Best of all, there are no hidden fees.

Find the first CD that aligns with your goals in the table below, sign up for an account in as little as a few minutes, and get started today:

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.