How to Pay Estimated Taxes in NY: A Step-by-Step Overview

Paying estimated taxes is essential for individuals who don’t have taxes withheld from their income, such as freelancers, business owners, and investors. Failing to make these payments on time can lead to penalties and interest charges.

To stay compliant with New York tax laws, taxpayers must calculate their estimated liability, follow the correct schedule, and use appropriate submission methods.

Who Must Make Estimated Payments

New York requires individuals, estates, and trusts to make estimated tax payments if they expect to owe at least $300 in state income tax after subtracting withholding and credits. This applies to those with income not subject to automatic withholding, such as self-employment earnings, rental income, dividends, and capital gains. Independent contractors, sole proprietors, and investors with significant earnings typically fall into this category.

Both residents and nonresidents with New York-source income must comply. A Florida resident who earns rental income from a Manhattan property, for example, is responsible for making estimated payments to New York. Part-year residents must calculate their liability based on the portion of the year they were subject to state taxation.

Some taxpayers are exempt. If an individual had no tax liability in the prior year and was a full-year New York resident, they are not required to submit estimated payments. Wage earners can also avoid these payments by adjusting their W-4 to increase withholding.

Calculating the Amount

To determine estimated tax payments, taxpayers must project their total taxable income for the year. New York’s state income tax rates in 2024 range from 4% to 10.9%, depending on income brackets. Deductions, credits, and other adjustments must also be factored in.

A common approach is using the prior year’s tax return as a baseline while adjusting for expected changes in income, deductions, or credits. For example, if a taxpayer earned $100,000 last year and expects similar earnings this year, they can reference their previous tax obligation. However, those with fluctuating income—such as business owners experiencing growth or investors realizing large capital gains—should recalculate to avoid underpayment penalties.

New York follows federal safe harbor rules, meaning taxpayers can avoid penalties if they pay at least 90% of the current year’s tax liability or 100% of the prior year’s tax, whichever is lower. For high-income individuals with adjusted gross income over $150,000, the threshold increases to 110% of the prior year’s tax.

Payment Intervals

Estimated tax payments in New York are made in four installments: April 15, June 15, September 15, and January 15 of the following year. If a due date falls on a weekend or holiday, the deadline moves to the next business day.

Since income can fluctuate, taxpayers should reassess their earnings before each deadline. A consultant who secures a major contract in July may need to increase their September payment, while a business owner with declining revenue in late fall may reduce their January payment.

Failure to make timely payments can result in underpayment penalties, calculated based on the unpaid amount and the number of days past the deadline. The state adjusts interest rates quarterly, making late payments increasingly expensive. To avoid penalties, taxpayers should monitor their cash flow and set aside funds in advance.

Methods to Submit Payments

New York offers multiple ways to submit estimated tax payments. The most efficient method is through the Online Services portal on the New York State Department of Taxation and Finance website. This allows direct payments from a bank account without fees and enables scheduling future payments.

For those preferring to pay by credit or debit card, New York partners with third-party processors. While convenient, this option includes processing fees—about 2.2% for credit card payments in 2024. Some taxpayers may find this worthwhile if their card offers rewards.

Traditional payment methods are also available. Taxpayers can mail a check or money order with Form IT-2105 (Estimated Tax Payment Voucher) to the designated processing center. Payments must be postmarked by the due date, and checks should include the taxpayer’s Social Security number, tax year, and payment type.

Adjusting Payments for Income Changes

For those with variable income, estimated tax payments may need adjustments throughout the year. Since New York bases payments on expected annual liability, taxpayers should update their estimates as earnings change.

One option is the annualized income installment method, which calculates payments based on actual earnings for each period instead of assuming steady income. This is useful for seasonal workers, such as real estate agents who close most deals in the summer or business owners with peak holiday sales. By recalculating each quarter, taxpayers can align payments with income fluctuations.

Another strategy is increasing withholding on other income sources, such as wages from a part-time job or retirement distributions. Unlike estimated tax payments, which must be made quarterly, withholding is treated as if paid evenly throughout the year. This can help those who realize late in the year that they have underpaid, as increasing withholding in the final months can prevent penalties without requiring a large lump sum payment in January.

Penalties and Interest

Failing to pay enough in estimated taxes or missing deadlines results in penalties and interest charges. New York calculates these based on the amount underpaid and the length of time it remains outstanding. The state adjusts interest rates quarterly, meaning overdue payments become more expensive over time.

The underpayment penalty is calculated similarly to the federal system, with interest applied to shortfalls for each quarter. Even if a taxpayer pays the full amount by year-end, penalties may still apply if payments were not made in the correct amounts at the required intervals. If a taxpayer underpays in April but catches up in September, interest accrues on the April shortfall until it is resolved.

Taxpayers can request a penalty waiver if they can show reasonable cause, such as a sudden job loss or natural disaster. However, interest charges generally cannot be waived, as they compensate the state for the delayed payment. To avoid these costs, taxpayers should regularly review their estimated tax obligations and adjust payments as needed.