Estimated taxes are taxes the IRS requires individuals to pay quarterly for their income that is not subject to withholding taxes. Self-employment income, dividends, and other sources of income that are not subject to payroll taxes must be filed quarterly or at other intervals; if someone misses the payments or does not pay enough, the person will be charged for the taxes plus interest and a fine. The person must estimate the taxes for the year and pay a quarter of the amount. A person may face fines when they do not pay at least 90% of the taxes they actually owed or 100% of the amount owed the previous year.
[Last updated in July of 2021 by the Wex Definitions Team]