What must taxpayers do if they owe tax and it is above a certain threshold?

When taxpayers owe tax that exceeds a certain threshold, they may need to make estimated tax payments. This requirement generally applies to individuals who are self-employed, have significant income from sources that do not withhold taxes (like dividends or interest), or experience other forms of income not subject to regular withholding. The IRS typically sets guidelines indicating when estimated payments are necessary, often when taxpayers expect to owe more than a specific amount at tax time.

Making these estimated payments helps prevent underpayment penalties and ensures that taxpayers are in compliance with their tax obligations throughout the year. By proactively addressing their tax liabilities through estimated payments, individuals can manage their financial responsibilities more effectively and avoid a larger bill when they file their annual tax return.