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Estimated Tax Payments

You may need to file estimated tax payments if you are a sole proprietor, self-employed individual, partner, or S corporation shareholder and you expect to owe tax of $1000 or more when you file your return. To figure your estimated tax payments, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. If you are filing as a corporation you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. Plus, if you had a tax liability for the prior year, you may have to pay estimated tax for the current year.

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.

Who does not have to make estimated tax payments?

If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. To do this, file a new Form W-4 (link to form sent in email) with your employer. There is a special line on Form W-4 for you to enter the additional amount you want your employer to withhold. You do not have to pay estimated tax for the current year if you meet all three of the following conditions.

  • You had no tax liability for the prior year
  • You were a U.S. citizen or resident for the whole year
  • Your prior tax year covered a 12 month period

You had no tax liability for the prior year if your total tax was zero or you did not have to file an income tax return.