Tax Debt Help - Making Those Estimated Tax Payments

• If you received income where taxes weren't withheld — such as money from self-employment, investments or alimony — you're generally required to pay estimated taxes.
• Use Form 1040-ES - Estimated Tax for Individuals to figure your estimated tax payments.
• If you underpay your estimated taxes, you might be subject to a penalty.

What are estimated taxes?

You're required to pay estimated taxes if you receive income from which taxes aren't withheld , including money from self-employment, investments and alimony, and your tax (after subtracting credits and withholding) is expected to be $1,000 or more. Here are a few good things to know about estimated tax payments:

• The payments are due April 15, June 16, Sept. 15 and Jan. 15.
  
• If you fail to pay enough on each installment due date, you may be subject to the penalty for underpayment of estimated tax even if your return shows a refund.
  
• If you pay in as much as your tax liability for the previous year, you can pay your balance due without penalty when you file your return, regardless of the amount. See below if your prior-year income was high.
  

How much do I pay?

As part of your year-end planning, compare your projected year-end tax payments with your expected tax liability. If your payments are expected to be less than 90% of current-year tax, you generally will have to increase your withholding or estimated tax payments.

However, if your payments are made timely and will be at least as much as your prior-year tax liability, you're probably safe from the penalty. But if your prior-year adjusted gross income was more than $150,000 ($75,000 if Married Filing Separately), you'll have to pay 110% of your prior year tax liability. Figure your estimated tax with Form 1040-ES - Estimated Tax for Individuals.

Overwitholding Taxes

Tax withheld from your paycheck is considered to be paid evenly throughout the year, which means overwithholding in November and December can make up for earlier underpayments. If you have a job, arrange with your employer to withhold extra amounts from the final paychecks of the year so you're not subject to the penalty when you file your return.

Underpayment of Estimated Taxes

If you do not make enough estimated tax payments and are subject to the penalty, don't automatically pay it. There are several exceptions to the penalty. Information can be found in the instructions for Form 2210.