How to Make Rhode Island Estimated Tax Payments

Estimated tax payments are a method for paying tax on income that is not subject to withholding. These payments are made throughout the year directly to the Rhode Island Division of Taxation. This pay-as-you-go system ensures that taxpayers meet their annual tax liability as they earn income, rather than paying in one large sum when they file their annual return.

Who Must Make Estimated Payments

An individual must make Rhode Island estimated tax payments if they anticipate owing $250 or more in state income tax for the year, after accounting for any state tax withheld and allowable tax credits. This requirement commonly affects individuals who receive income that is not subject to payroll withholding. The obligation extends to partners in a partnership and shareholders in an S corporation, as the business income flows through to their personal returns. Other common sources of income include:

• Earnings from self-employment, such as those received by freelancers or consultants
• Interest and dividends from investments
• Capital gains from the sale of assets
• Rental income from real estate properties

Calculating Your Required Payment

To determine your estimated tax payments, you must calculate your total required annual payment. The “safe harbor” rule provides a clear benchmark for avoiding underpayment penalties. Under this rule, you must pay the lesser of two amounts: 80% of the tax that will be due on your current year’s Rhode Island tax return or 100% of the total tax shown on your prior year’s Rhode Island return. The prior-year method can only be used if you filed a return for a full 12-month period in the previous year.

Once you determine the total required annual payment, you divide that amount by four to establish the payment for each quarterly due date.

For taxpayers whose income is not consistent, such as those with seasonal businesses, the annualized income method may be a more suitable option. This method allows you to calculate your payment based on the income actually earned in each period, which can prevent overpaying in early quarters. It requires you to re-calculate your required payment before each quarterly due date based on your year-to-date income.

Required Forms and Payment Deadlines

To make estimated tax payments by mail, you will use Form RI-1040ES, Estimated Tax Payment for Individuals. This form consists of four payment vouchers, one for each quarterly period. When completing a voucher, you must provide your name, address, and Social Security number, along with the payment amount for that quarter. The vouchers and instructions for Form RI-1040ES can be downloaded from the Rhode Island Division of Taxation website.

Payments are due in four quarterly installments. The deadlines are April 15, June 15, September 15, and January 15 of the following year. If any of these dates fall on a weekend or a holiday, the payment is due on the next business day.

How to Submit Your Payments

You have two primary methods for submitting payments. To pay by mail, send a check or money order with the completed RI-1040ES voucher. Make your payment payable to the “RI Division of Taxation” and mail it to the address specified on the form, which is the Rhode Island Division of Taxation, One Capitol Hill, Providence, RI 02908. It is good practice to write your Social Security number and the tax year on the memo line of your check.

Alternatively, you can make payments electronically through the Rhode Island Division of Taxation’s online portal. This method allows for direct payment from a bank account or by credit card. To use the online system, you will need your tax information readily available, including your Social Security number and the payment amount.

Underpayment Penalties

Failing to pay a sufficient amount of tax throughout the year via withholding and estimated payments can result in a penalty. Rhode Island imposes a penalty for the underpayment of estimated tax if you have not met the required payment thresholds established by the safe harbor rule. The penalty is not a flat fee but is calculated based on the amount of the underpayment for the specific period it was due.

The calculation considers how much you underpaid for each quarter and for how long the amount remained unpaid. This means that the longer a required payment is overdue, the higher the penalty will be. When you file your annual state income tax return, you may need to complete Form RI-2210, Underpayment of Estimated Tax by Individuals, to determine the exact penalty amount you owe.