Do I Need to Make Estimated Tax Payments?
February 23, 2008 · Print This Article
Q: Am I required to make estimated tax payments, and how do I do that?
A: The federal income tax system is a pay-as-you-go tax system. That means you pay taxes as you earn income throughout the year. If you are an employee of a company, you do this through withholding. If you are self employed, you do this through estimated tax payments.
The general rule is that you must make estimated tax payments if you expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and tax credits, then you may need to make estimated tax payments.
Also if you haven’t paid in at least…
* 90% of the tax due on your current year tax return, or
* 100% of the tax due on last year’s tax return
then you may need to make estimated tax payments.
Generally, you will estimate your tax liability for the entire year and divide that amount by four to determine your quarterly estimated tax payments. IRS has calculators on their website to help with this.
The due dates for estimated tax payments are:
April 15
June 15
September 15
January 15 the next year
Use Form 1040-ES to make estimated tax payments. Your accountant should calculate and prepare coupons for you every year.
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