• If a taxpayer expects a balance due of $1,000 or more for next year’s (2025) tax return, and won’t otherwise have paid at least 90% of the tax due, then they risk having the IRS assess a penalty for underpayment. To avoid this, there are four options:
    • Increase withholding from their paychecks using Form W-4, normally available from their employer, but which can be printed from the irs.gov website if necessary.
  • Increase withholding from their periodic (ongoing) retirement income using Form W-4P, which can be completed online and then printed.  
  • Note: Form W-4R is for non-periodic payments, and is required if the taxpayer wants to change the mandatory (default) withholding of 10%. 
  • Increase withholding from federal payments (such as Social Security) using Form W-4V, which can be completed online, and then printed. 
      • Note: Form W-4V offers only four federal withholding options: 7%, 10%, 12%, and 22%. State tax withholding is not available.
    • Make (or increase) quarterly estimated payments, as described in this section.
  • To determine the quarterly amount for estimated tax payments (normally these are set to be equal), which show on the quarterly Form 1040-ES:
    • If no substantial change in income is expected for the next calendar year, compared to the current tax return, the current return can be used as the basis for determining the quarterly amounts.
    • If a substantial change in income, filing status, dependents, or credits is expected in the coming year, or has already happened by the time the current return is prepared, there are four options that calculate estimated payments:
      • Use the Tax Withholding Estimator [link is in TaxSlayer, on the Main Menu page, at the bottom of the left navigation bar].
      • Use the Estimated Tax Worksheet with MFJ/MFS Comparison at cotaxaide.org/tools/.
      • Print the Estimated Tax Worksheet, from the instructions for Form 1040-ES, and fill it out with the taxpayer.
      • Use the 1040 Estimated Payments Calculator in TaxSlayer. Go to [Federal Section > Payments & Estimates > 1040 Estimated Payments Calculator]. Data from the current return is in the left-hand column. Enter the numbers for next year in the right-hand column, then click Continue to display the amount to enter for each payment on the vouchers screen.
    • The taxpayer owes no underpayment penalty if the taxes withheld were at least 100% of what was owed (Line 24, Total Tax, on Form 1040).
      • Note: For 2024 returns where the AGI is over $150,000 ($75,000 if MFS), the threshold is 110%.  
  • Once the desired quarterly amounts have been calculated, go to the Estimated Payments for Next Year page [Federal Section > Payments & Estimates > Vouchers for Next Year's Estimated Payments] and enter the amounts.
    • Four 1040-ES forms print as part of the PDF for the tax return.
      • Make sure the taxpayer understands that it’s not required, when making the quarterly payment, to pay exactly what’s printed. If the taxpayer is mailing the 1040-ES, the payment can be for a different amount. The taxpayer may cross out the incorrect printed amount on the form and write in the actual amount being paid.
  • Quarterly payments can be made in several different ways, although paying by check, through the mail, is the most common.
    • A quarterly estimated-tax payment should be mailed separately from mailing the 1040-V payment voucher or the federal tax return (addresses on page iv). 
    • Taxpayers may also make estimated tax payments by direct debit from their bank account (using Electronic Federal Tax Payment System, EFTPS.gov), or by other methods such as a credit card (for which there is an additional fee). Options are described at IRS.gov/payments.

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