Although most of us only ever think about our income taxes once a year as April 15th approaches, you can rest assured that the Louisiana Department of Revenue (DOR) and the federal Internal Revenue Service (IRS) pay much closer attention than we do. After all, we pay taxes based on how much income we earned during the year, and so it’s not too surprising that the State and Federal tax authorities expect to receive tax payments from us during the year.
We probably don’t realize it, but those of us who are wage and salary earners pay taxes throughout the year. This is because our state and federal income taxes are taken out of our paycheck before we even receive it. This “pay-as-you-go” withholding process takes place regardless of whether we get paid every week, or every two weeks, or every month. And then 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 Louisiana DOR. 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.
This is why those of us whose only source of income is the regular paycheck we receive from our employer only tend to think about our income taxes once a year. But not everyone is so lucky to have their regular tax payments taken care of on their behalf. What about people like Greg, the pool guy, who works for himself? 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. And by the way, 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 the types of income we have just discussed is if the taxpayer takes the responsibility.
For example, our pool man, Greg, 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 and to the tax agency of the state where he earned his untaxed income. Just like the rest of us, when Greg completes his tax return at the end of the year, he will find out whether he owes more tax or if he’s due for a refund.
Many individual states require the payment of estimated taxes by people like Greg, although the rules tend to differ slightly from one state to the next. Let’s now look at the rules that apply to Greg if he works in Louisiana.
Louisiana Estimated Tax Rules for Residents and Nonresidents
Regardless of whether they are a Louisiana resident for any part of the year, taxpayers who are required to file a Louisiana income tax return and expect to owe more than $1,000 for single filers (or $2,000 for joint filers) after taking into consideration any taxes already withheld and allowable credits, must make a declaration of estimated income tax on or before January 15th and pay estimated tax payments.
To calculate the estimated tax:
- Resident taxpayers can estimate their income tax liability based on their expected amount of Louisiana taxable income by using the current year's Income Tax Tables.
- Nonresidents or part-year residents can calculate the amount of Louisiana estimated tax by using the Tax Computation Worksheet found in the instructions for Form IT-540ES(I).
Taxpayers can choose to pay the estimated tax in full with their declaration of estimated tax, or in equal installments, on or before the following dates, unless the date 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.
The above due dates are different for taxpayers who use a fiscal year rather than a calendar year. In those cases, the first payment is due 3 months and 15 days after the beginning of the taxpayer’s fiscal year, with the next payment due on the 15th day of the 6th month of the taxpayer’s fiscal year, and so on.
Special Rules for Fishermen and Farmers
The rules are slightly different for taxpayers who earn at least two-thirds of their 2024 gross income from farming or fishing. Although these taxpayers can make quarterly payments like everyone else, instead they may choose to:
- Pay their 2024 estimated tax in full by January 15, 2025; or
- File their 2024 income tax return on or before March 3, 2025, and pay the total tax due. No estimated tax payments are needed for 2024 if the taxpayer chooses this option.
Penalties
It is important to note that penalties and interest may be charged to taxpayers who do not meet one of the exceptions above and fail to make their required estimated payments. The same applies if payments are underpaid or paid late in any quarter, even if the taxpayer is due to receive a refund when they file their income tax return.
Payment Methods
Payments may be made by any of the following methods:
- By mail with a check or money order along with a Louisiana Estimated Tax Declaration Voucher, Form IT-540ES
- Electronically by online transfers directly from your checking or savings account at Louisiana File Online
- Electronically by credit card at Official Payments
For more information, refer to the instructions for
Louisiana Estimated Tax Voucher for Individuals.