Reminder: Q1 2025 Estimated Tax Payment Deadline Approaching

As the first quarter of the year progresses, it's time for manufacturers and other businesses to prepare for their upcoming federal estimated tax obligations. The deadline for the first quarterly estimated tax payment for the 2025 tax year is typically April 15, 2025.

Staying compliant with estimated tax requirements is crucial to avoid penalties. This reminder covers the essentials you need to know.

Who Needs to Pay Estimated Taxes?

Generally, you must pay estimated taxes if you expect to owe at least $1,000 in taxes for the year when you file your return, and your withholding and refundable credits will be less than the smaller of:

• 90% of the tax to be shown on your current year's tax return, OR
• 100% of the tax shown on your prior year's tax return (if your prior year return covered all 12 months). Note: This percentage may be higher for high-income taxpayers.

This commonly applies to:

• Sole proprietors, partners, and S corporation shareholders who expect to owe tax.
• Corporations that expect to owe tax.
• Individuals who receive income not subject to withholding (e.g., certain investment income, self-employment income).

For manufacturers operating as C-corporations, partnerships, or S-corporations, estimated payments are often necessary.

Calculating and Paying Your Q1 Payment

Your Q1 estimated tax payment should generally cover your expected tax liability for income earned between January 1 and March 31.

• Calculation: Estimate your total expected adjusted gross income, deductions, credits, and taxes for the year. Divide the total expected tax by four to get your quarterly payment amount (adjustments may be needed if income isn't earned evenly). Form 1040-ES (for individuals) or Form 1120-W (for corporations) worksheets can help.
• Payment Methods: Payments can be made electronically via the IRS Direct Pay system, the Electronic Federal Tax Payment System (EFTPS - registration required), by debit/credit card, or by mailing a check with the appropriate payment voucher (Form 1040-ES or specific corporate forms). Electronic payments are generally recommended for speed and confirmation.

Accurate financial reporting and projections are key to estimating your liability correctly.

Avoid Underpayment Penalties

Failure to pay enough estimated tax by the deadline, or paying late, can result in penalties. The IRS calculates penalties based on the amount of underpayment and the period it remained unpaid.

Even if you expect a refund when you file your annual return, you could still face penalties if you didn't pay enough tax through withholding and estimated payments throughout the year according to the quarterly deadlines.

Plan Ahead

Mark your calender for **April 15, 2025**. Don't wait until the last minute to calculate and make your payment. Proactive tax planning throughout the year can help ensure you meet your obligations accurately and avoid surprises.

If your business income fluctuates significantly, or if you anticipate major changes this year, accurately estimating your tax liability can be complex.