What are estimated income taxes?
What are withholdings?
Am I required to pay estimated taxes?
How much do I need to pay?
What's the deadline to pay estimated taxes?
How do I pay estimated taxes online?
Does it matter if my income has changed since last year?
Are there any special ruiles for military pay?
How does the Making Work Pay tax credit affect the self-employed?
What are estimated income taxes?
Estimated income taxes (also known as "estimated taxes") are those taxes paid on personal income that is not subject to withholding. In other words, taxes that have not been taken from your earnings.Currently, over 10 million Americans pay estimated taxes because they own their own business or partnership, or have investment income.
Federal income tax is a pay-as-you-go system, so taxes must be paid on income as it is received. Tax is generally withheld from your wages or salary before you received a paycheck; however, income such as self-employment income, rental income, alimony, interest, dividends and capital gains do not generally have tax withheld.
What are witholdings?
If you are an employee, your employer probably withholds income tax from your pay. In addition, tax may be withheld from certain other income, including pensions, bonuses, commissions, and gambling winnings. In each case, the amount withheld is paid to the Internal Revenue Service (IRS) in your name.
Am I required to pay estimated taxes?
If you are self-employed, or make substantial gains on your investments, you may need to pay estimated taxes. This is because tax is generally not withheld from income such as alimony, interest, dividends, rental income, self-employment income and capital gains. As a result, the IRS requires you to pay tax on income throughout the year (quarterly), rather than waiting for you to file your annual income tax return.
If tax is not withheld from your income, you must estimate how much income you’ll have for the year and make quarterly payments on that amount. If you postpone your payment until your income tax return is due, the IRS may charge you penalties and interest.
How much do I need to pay?
In most cases, you must make estimated tax payments if you expect to owe $1,000 or more in taxes for the year.
- If your adjusted gross income was less than $150,000 last year, then you can pay either 90% of this year’s tax liability or 100% of last year’s tax liability.
- If your adjusted gross income was more than $150,000 last year, you must pay either 90% of this year’s tax liability or 110% of last year’s tax liability.
- If you do not pay enough in estimated, you could face a fine or penalty.
What's the deadline to pay estimated taxes?
- January 15: Estimated tax due. Fourth-quarter estimated tax payment (using Form 1040-ES) for 2011 is due. You may delay making this payment (using form 1040-ES) until Jan. 31 if you file your 2008 return (Form 1040) and pay any tax due by Jan. 31.
- April 15: Estimated tax due. First-quarter estimated tax payment (using Form 1040-ES) for 2011 is due.
- June 15: Estimated tax due. Second-quarter estimated tax payment (using Form 1040-ES) for 2011 is due.
- September 15: Estimated tax due. Third-quarter estimated tax payment (using Form 1040-ES) for 2011 is due.
Note: If a payment is due on a holiday, Saturday or Sunday, the payment deadline is moved to the next business day. View our 2009 estimated tax dates calendar.
How do I pay estimated taxes online?
Paying estimated taxes online is easy, thanks to Easy Estimated taxes. Start paying estimated taxes online now.
Does it matter if my income has changed since last year?
If your income has increased substantially from last year, you might owe a considerable amount of additional income tax for this tax year. At this point you should recalculate your total tax due for the year to increase your future estimated payments.
Are there any special rules for military pay?
Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes. This is true despite the fact military pay is treated as a pension or annuity for other tax purposes.
How does the Making Work Pay tax credit affect the self-employed?
Self-employed taxpayers can claim the Making Work Pay credit on their 2009 return filed in 2010. Self-employed individuals should evaluate their expected income tax liability and determine whether they want to make any adjustments in their estimated tax payments.
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