It depends on what you do for a living and what type of income you receive. If you have income from sources such as self-employment, interest, dividends, alimony, rent, prizes, awards or the sales of assets, then you may have to pay estimated tax.
Payments are spaced through the year into four periods or due dates. Generally, the due dates are April 15, June 15, Sept. 15 and Jan. 15.
As a general rule, you must pay estimated taxes if both of these statements apply:
- You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and
- You expect your withholding and credits to be less than the smaller of 90% of your taxes for the year or 100% of the tax on your previous year’s return. There are special rules for farmers, fishermen, certain household employers and certain higher-income taxpayers.
If you’re a sole proprietor, partner or S corporation shareholder, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Form 1040ES, “Estimated Tax for Individuals,” provides what you need to pay estimated taxes. This includes instructions, worksheets, schedules and payment vouchers.
The easiest way to pay estimated taxes, however, is electronically through the Electronic Federal Tax Payment System. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.
Check with your tax advisor at LGT to ensure you’re paying the correct amount to the federal government and to find out about any state estimated payments you may owe.
The services of a legal or tax advisor should be sought before implementing any ideas contained in this blog. To reach a financial advisor at Lane Gorman Trubitt, PLLC, call 214.871.7500 or email at firstname.lastname@example.org.