I see a lot of confusion about this relatively simple topic, so let's clear it up.

1. Estimated payments in general. If you're strictly on W2 salary, your IRS taxes are taken out of your paychecks. Often they are taking more than you actually owe, and this is how you end up getting an IRS refund. When you're self-employed, such as a Realtor or a wholesaler or a flipper, nobody takes taxes out of your commissions, assignment fees or proceeds from closings. You end up owing money the IRS.

The IRS does not want you to wait until the next year and pay your full tax bill of, say, $8,000. Instead, they want you to pay $2,000 in four installments: April 15, June 15, September 15 and January 15. This is called quarterly estimated payments.

2. What if I don't pay? You will have two issues. First, the IRS will charge you what they call penalty but it is actually calculated as interest. Not a lot of money, but still extra. Second, you're technically not in compliance, which can cause various problems such as being unable to set up a payment plan for your old IRS debts or get certain late penalties waived.

3. What is different in 2020? Your April 15 and June 15 installments were postponed until July 15. You owe these two installments on July 15, and you can combine them into a single payment. But it has to be equal to TWO quarterly payments, not one.

4. But I can file an extension! Yes, you can file an extension on July 15. It gives you more time, until October 15, to file your 2019 tax return. However it does NOT give you more time to pay. By July 15, you need to pay BOTH your 2020 estimated taxes (two quarters worth) AND the balance of your 2019 taxes.

5. How do I know how much to pay? You're supposed to estimate it. Which is easier said than done, because your income probably fluctuates already, plus Covid-19 makes everything uncertain. The IRS has an online estimator, but it's useless for investors. Other than having a good bookkeeping system and a good accountant for a responsible estimate, your next best move is to look at your 2019 tax bill and divide it by 4. You may still come short, but you will at least avoid the penalty.

And if your 2019 taxes are not ready? Well, then you need to estimate them, too. Based on your books if you have them or on your 2018 taxes or on your crystal ball. Just remember that penalties kick in on July 16.

6. How to pay? I highly recommend paying directly on the IRS website. Bank draft is free, credit cards have a fee. Do not combine your 2020 estimated payments with your 2019 balance due. These should be two separate payments. No forms or vouchers needed.