If you earn income which is not subject to withholding, such as interest, dividends, income from self-employment, rent, alimony, investment gains, awards and prices then you may have to pay estimated tax payments.
You might also have to pay estimated taxes if your income tax withholding on pension, salary, or other income which is not enough, or if you had a tax liability for the prior year.
Please do consult a tax expertise regarding your individual situation.
HOW TO FIGURE ESTIMATED TAXES
You must include your expected adjusted gross income, taxable income, taxes, deductions, and credit for the year to calculate your estimated tax.
Consider using your prior year’s federal tax return as a guide.
HOW TO PAY ESTIMATED TAXES
You may pay estimated taxes online, by phone or even through the mail.
If you are filing as a partner, a sole proprietor, S corporation shareholder or a self-employed individual & expect to owe tax of $1.000 or more when you file a return, you should use Form 1040-ES, estimated tax for individuals, to calculate and pay your estimated tax
The year is divided into four payment periods for estimated tax purposes each with a specific payment due date. If at all you fail to pay taxes by the due date of each payment periods, you would be charged a penalty, even if you are due a refund when you file your income tax return.
Most tax payers would generally avoid the penalty if at all they owe less than $1,000 in taxes after subtracting their withholdings and credits, or if they at least paid 90% of tax for current year, or 1000% of tax shown on return for the prior year, whichever is smaller.
Accurate, up-to-date financial records and consultations with your tax guru can also help you make timely estimate.