In general, most people don’t consider paying taxes throughout the year except at tax time when faced with a large balance due. It might be low on the to-do lists of those who do consider it, but compliance with federal and state agencies is critical.
If you are an employee, it is your employer who is responsible for withholding taxes from your paycheck and sending that to the IRS and your state tax agency. This way, taxes are paid as you earn your money and, at the end of the year, you may not owe anything, or you might have a refund to collect. Keep in mind that it is your responsibility to complete the forms correctly with your payroll department so they can withhold the appropriate amount.
However, if you are self-employed or have other income sources besides a wage, you may need to pay estimated taxes on the income that is not subject to direct withholding. Making payments for estimated taxes can help you to owe less at filing time and avoid any underpayment penalties. If you’ve never made an estimated tax payment before, you may wonder how to go about making it. Before we get to the payment steps, let’s remind ourselves why and when they are due.
In what cases would I need to make an estimated payment?
In Massachusetts, you must make estimated tax payments if you expect to owe more than $400 in taxes on income not subject to withholding. Both residents and non-residents are subject to this rule. This isn’t the only reason to make an estimated payment, so if your situation is a bit different, check for more guidance on Form 1-ES or reach out to a qualified tax professional in your area to assist you.
How do I know how much I will owe?
The amount you will owe is certainly not something you can pull out of thin air. You have two options in front of you – tackle it on your own following the instructions the state provided or contact a tax professional for assistance. There are many qualified professionals who can help you with everything from figuring out the appropriate amount to pay to determining the best way to pay it. If you decide to be brave and try your hand at it, Form 1-ES is where you start. You can use the
provided worksheet to calculate the amount owed and record how much you must pay every quarter. The form also has four vouchers you can prepare and use when you pay. These vouchers look the same for every quarter, but you must be careful when entering the due dates.
When are these payments due?
Estimated taxes are due every quarter during the year, as you might have guessed from the name “quarterly estimates.” Generally, you must pay in full on or before April 15th or in equal installments on or before April 15th, June 15th, September 15th, and January 15th. There are four estimated due dates; the last always falls in January of the following year. There are some exceptions to these due dates – for example, if the date falls on a Saturday, Sunday, or a legal holiday, then the filing and payment may be made on the next business day. More exceptions apply if your tax year is not a calendar year but a fiscal one. If that is the case, your tax payments are due on the 15th day of the fourth, sixth, ninth, and 15th day of the next fiscal year.
Now that you know when estimates are due, let us walk through the payment process.
Luckily, the state has a convenient online payment platform called
MassTaxConnect, which you can use to make payments quickly.
This is how we recommend you make these payments as the platform is secure and easy to use. With MassTaxConnect, you can access your payment history, schedule payments in advance, modify payments, and exchange secure messages with revenue agents if you need assistance.
Remember the vouchers I mentioned before? They are necessary if you make a payment by mail. However, keep in mind that you cannot simply mail a check or money order to the Commonwealth and expect them to know where to put the money. Including the appropriate details on the vouchers is critical; they contain your name, address, Social Security number, and due date to apply the payment to the appropriate tax period when processed.
Lastly, it is very important to pay attention to detail when making estimated payments. Here are some things to look out for:
- If you want to pay estimates for a prior tax year, you will need to mail in your payment. MassTaxConnect will not accept estimated payments for a previous year after January 15th. The online system only accepts payments for the current tax year.
- Remember to print the most recent Form 1-ES voucher with your payment. The state will not accept prior-year printable vouchers, and your payment won’t be processed.
- Make sure to pay using the correct voucher. Some taxpayers will send in Form PV, the Massachusetts Income Tax Payment Voucher, instead of Form 1-ES. However, Form PV should only be used to submit a payment due with a tax return or an amended tax return.
- Pay online if and when possible. This method will help you avoid running into issues when making payments.
- Remember that mistakes can happen when making payments, but your money is never lost. You can always call the state and ask for help locating an improperly applied payment.
Understanding estimated taxes and when to pay them will help you to avoid penalties. Making sufficient payments on time is a crucial first step. No underpayment penalty is due if you owe less than $400, if you are a farmer or fisherman who has at least two-thirds of the payments made, or if you were a full-year resident of the state and did not owe any taxes on your prior year return. You can check
Form M-2210 for more information on exceptions and how the underpayment penalty is calculated.
Taxes make most people nervous, understandably so. If you are not sure how to proceed, seek professional assistance. To find credentialed professionals in your area, use the
IRS Pro Preparer Directory and search by your zip code.
If you have found yourself in need of making estimated payments, I hope this guide is just what you need to tackle paying them in the Commonwealth of Massachusetts.