Utah Estimated Tax Payments | What You Need To Know

September, 03 2024 by Steve Banner, EA, MBA

Before we get started, let me reassure any Utah taxpayers who may have been frightened by the title of this article. When we refer to “estimated tax,” we are not going to be talking about any new type of tax or tax liability that has been sprung upon you when you weren’t looking. Instead, we are referring to the regular taxes that the State of Utah levies on folks who are required to file a Utah tax return.

As you are only too well aware, both the United States Internal Revenue Service (IRS) and the Utah State Tax Commission expect to receive tax payments from you each year based on how much income you earned during that period. Those of us who are wage and salary earners can get away with not thinking about tax payments throughout the year because our state and federal taxes are taken out of our paychecks by our employers before we even receive them. This “pay-as-you-go” withholding process takes place regardless of whether we get paid every week, every two weeks, or every month. When we prepare our tax returns at the end of the year, we report our taxable income and figure out our correct tax liability for the year. When we compare that tax liability to the total amount that has been withheld by our employers during the year, we find out immediately whether we will receive a refund or whether we owe further amounts to the IRS or the Utah State Tax Commission. In other words, we get a refund if our employer withheld too much for tax, and we have a balance due if the employer withheld too little.

However, not everyone who works for a living can enjoy the luxury of having their regular tax payments taken care of on their behalf. What about Gregory, who works for himself part-time as a ski instructor to pay his way through college? He doesn’t have a company payroll department to issue paychecks for him and withhold taxes on his income. He has to take on this responsibility himself, just like other types of taxpayers, such as small business owners, independent contractors, and freelancers who do not normally have taxes withheld from the payments they receive for their work. This also applies to plenty of other folks because taxes are usually not withheld for taxpayers who receive other types of income, such as rental income, dividend income, capital gains, interest income, and even income from cryptocurrency. The only way that taxes can be paid during the course of the year on these types of income is if the taxpayers themselves take the responsibility.

Using the example of Gregory, he can look at his situation as if he received a single paycheck at the end of every quarter of the year instead of a series of payments from his individual customers. At the end of each quarter, he estimates the amount of taxes he owes for that quarter and sends a check to the IRS. He can also send a check to the Utah State Tax Commission if he so desires, but, as we will soon see, the state does not actually mandate him to do so. The IRS, on the other hand, may penalize Gregory if he fails to make his estimated tax payments on time and in full. When Gregory completes his Federal and Utah tax returns at the end of the year, he will find out, just like the rest of us, whether he owes more tax or if he’s due a refund.

Many individual states require the payment of estimated taxes by people like Gregory, although the rules tend to differ slightly from one state to the next. Let’s now look at the rules that apply to Gregory for his work in Utah.

 

Utah Estimated Tax Rules for Residents and Nonresidents

As discussed above, Utah does not require quarterly estimated tax payments by taxpayers who file a Utah tax return. However, taxpayers can make a prepayment at any time. But it is also important to keep in mind that the state does require that all Utah income taxes for the tax year be paid on or before the due date of the tax return (normally April 15th for taxpayers who have not requested an extension or the 15th day of the fourth month of the new year for fiscal-year taxpayers).

Taxpayers may be subject to penalties and interest if they do not file their return on time or pay all income tax due by the due date. The penalties are based on the number of days late and calculated as a percentage of the amount of unpaid tax. Interest is calculated from the due date to the actual date paid (at the rate of 7% for 2024).

This all means that our ski instructor, Gregory, can wait until April 15th to pay his Utah taxes from the previous year in one lump sum, provided he has been wise enough to put the necessary funds aside throughout the year. On the other hand, if he does not trust himself to leave a sufficient amount aside, he could make a series of prepayments during the year and pay the remaining balance on April 15th.
 

Payment Methods

Payments may be made by any of the following methods:

• By mail with a check or money order after printing an Individual Income Tax Return Coupon, Form TC-547.
• Online by credit card, an electronic check (ACH debit), or other electronic options at the Utah.gov Taxpayer Access Point.

For more information on prepayments, refer to Form TC-546 Individual Income Tax Prepayment Coupon.