Pennsylvania Estimated Tax Payments  | What You Need To Know

May, 03 2024 by Steve Banner, EA, MBA

Before getting started, we need to make sure we’re all on the same page when we use the term “estimated tax.” Just to clarify, we’re not talking about having your tax return prepared by one of those fly-by-night crooks who don’t know what they’re doing and just come up with a “guesstimate” plucked out of thin air rather than an accurate assessment of your true tax liability. Instead, what we’re referring to is a system that allows you to estimate the amount of tax likely to be due on certain types of income that is not taxed before you receive it. If your only income for the year is a regular paycheck from your employer, you will not have to bother with estimated taxes because your employer normally withholds both state and federal taxes on your behalf.

But this is not the case for everyone. For example, taxes are normally not withheld from the payments received by small business owners, independent contractors, freelancers, and other self-employed taxpayers. As a result, these folks may make a tax payment up to four times each year based on their estimated income for the period. But other types of taxpayers can also be affected because estimated taxes may be made for any type of taxable income that has not been subjected to withholding. This can include things like earned income, dividend income, rental income, interest income, capital gains, and even income from cryptocurrency.

Don’t worry - this does not mean that you will have to make estimated tax payments for the $20 in interest that you receive from your bank account each month. But if you expect to receive more than $9,500 of Pennsylvania taxable income during 2024 that has not had taxes withheld from it, the PA Department of Revenue expects you to make PA Estimated Tax installment payments. It’s not actually compulsory for you to make these payments but, if you haven’t made those payments during the year, you will have to pay the full amount of PA taxes owed when you file your tax return – in addition to an underestimated payment penalty. In other words, it’s in your best interests to make your regular estimated tax payments during the year instead of having to come up with lump sum at the end of the year and pay a penalty as well.

The income threshold amount for estimated tax payments was increased from $8,000 in 2023 and earlier years, and will change in future years according to the following table:

 

It can be very difficult for some taxpayers – such as those whose income fluctuates throughout the year – to avoid the underestimated payment penalty because they cannot know in advance exactly what their tax liability will be. The Department of Revenue offers a safe harbor for this reason. Taxpayers can avoid the penalty if they use four equal timely installments to pay at least 90% of this year's tax, or 100% of last year's tax.

Estimated tax installment payments are normally due on the following dates, unless the 15th falls on a weekend or holiday. In that case, the payment will be due on the next business day:

• April 15th;
• June 15th;
• September 15th; and
• January 15th of the following year.

For taxpayers who use a fiscal year instead of the calendar year, the first three payments are due on the 15th day of the 4th, 6th, 9th months of their fiscal year, followed by the final payment on the 15th of the first month of the next fiscal year.

Instead of making their estimated tax payments for the year in four equal installments, taxpayers also have the option of making a single payment of their entire year’s estimated tax in one payment on or before the date that their first of four installments would normally be due (April 15th for calendar year taxpayers).

Payments may be made electronically through myPATH or via mail by using Form PA-40ESR. For more information, refer to Estimated Tax Payments - For PA Personal Income Tax.