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Estimated Tax
Payments
Ordering
TurboTax Online Software
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.
Making Tax Payments
- Review your most recent tax
return.
- Look at your total tax and your
withholding. On Form 1040, this
would be lines 62 (total tax) and 63
(withholding).
- Subtract the two figures. Total
tax minus withholding. The result is
your unfunded tax liability.
- Divide this figure by four (for
quarterly payments) or by twelve (if
you want to make monthly payments).
- Make your payments at least
every three months. Estimated tax
payments are due by April 15th, June
15th, September 15th, and January
15th.
- If you expect your income to
increase or to decrease
significantly, you may want to
calculate your estimated taxes using
your projected total income.
- If you are self-employed, don't
forget to estimate both your regular
income tax and your self-employment
tax.
- Find your average tax rate
by dividing your income tax
(1040 line 43) by your adjusted
gross income (1040 line 37).
Now, add your average tax rate
to the self-employment tax rate
of 15.3%. Multiply this
percentage by your quarterly net
profit to figure how much
estimated tax to pay.
- Mail your estimated tax payment
to the IRS using Form 1040-ES. Make
your check payable to "United States
Treasury" put your Social Security
Number on your check.
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.
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