If you receive income that is not subject to withholding, you likely will need to pay estimated taxes during the year. Usually, this income comes from self-employment, interest, dividends, alimony, rent, gains from the sales of assets, and prizes or awards.
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 any tax withholding and credits, and
You expect that your withholding and credits to be less than the smaller of 90% of your current year taxes or 100% of the tax on your prior year return.
There are special rules for farmers, fishermen, household employers and higher income taxpayers. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
Estimated taxes are paid quarterly, on April 15, June 15, September 15 and January 15. Payments may be mailed with Form 1040-ES, Estimated Tax for Individuals, or may be made electronically. We can calculate your estimated taxes and help you arrange payment. Please let me know if you expect to have income without withholding in any tax year.
(June 7, 2011)
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