Estimated Payments
by ELIZABETH CHECKLEYEstimated tax payments are made to the IRS when you are receiving income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. Some people also have to pay estimated tax payments when the taxes being withheld in their salary, pension or other income is too low.
How to Pay Your Estimated Taxes
- Determine if you are required to fill-out estimated tax payments. This could include one of the following if you’re not already withholding taxes:
- On your individual tax return, you had a tax liability on your previous tax return
- On your individual tax return, you anticipate owing at least $1,000 in taxes (after all your tax deductions and credits)
- On your individual tax return, you expect your tax deductions and credits to be smaller than 90% of your current tax return or 100% of the tax shown on you previous return
- Sole proprietors, partners, S Corporation Shareholders. You usually have to pay estimated taxes if you expect to owe taxes of $1000 or more. See Publication 505 for more details.
- Corporations. If you expect to owe $500 or more in taxes when you file your return, it is suggested that you make estimated tax payments.
- Determine which Estimated Tax Payments form you need.
- For individuals. Individual Estimated Tax Form 1040-ES.
- For corporations. Estimated Tax for Corporations.
- Penalty for being late or underpayment. You will have to pay a penalty if you under estimate your taxes or if you’re late with a payment.
Common Problems
- If you're a farmer or fisherman, and 66 2/3% or more if your gross income is derived from these activities, you must pay estimated taxes.
- Household employment taxes must be included when you have federal income tax withheld from wages, pensions, annuities, gambling earnings, or other income; or if you would be required to make estimated payments to avoid a penalty (if household employment taxes are not included).
- For taxpayers with adjusted gross incomes of $150,000 or over ($75,000 for married, filing separately), or if you expect your withholding and refundable credits to be less than 110% of the tax shown on your 2009 return, you must make estimated tax payments.
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