Estimated tax is the method
used to pay tax on income
that is not subject to
withholding. This includes
income from self-employment,
interest, dividends,
alimony, rent, gains from
the sale of assets, prizes
and awards. You also may
have to pay estimated tax if
the amount of income tax
being withheld from your
salary, pension, or other
income is not enough.
Estimated tax is used to pay
both income tax and
self-employment tax, as well
as other taxes and amounts
reported on your tax return.
If you do not pay enough
through withholding or
estimated tax payments, you
may be charged a penalty. If
you do not pay enough by the
due date of each payment
period you may be charged a
penalty even if you are due
a refund when you file your
tax return.
The payments are due April 15, June 16,
Sept. 15 and Jan. 15.
Sole proprietors, partners,
and S corporation shareholders -
You generally have to make estimated tax
payments if you expect to owe tax of
$1,000 or more when you file your
return. Use Form 1040-ES, Estimated Tax
for Individuals, to figure and pay your
estimated tax. For additional
information, refer to Publication
505, Tax Withholding and Estimated Tax.
If you fail to pay enough on each
installment due date, you may be subject
to the penalty for underpayment of
estimated tax even if your return shows
a refund.
If you pay in as much as your tax
liability for the previous year, you can
pay your balance due without penalty
when you file your return, regardless of
the amount. See below if your prior-year
income was high.
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