Estimated Taxes

  • Estimated taxes are tax payments made to the IRS on income you have that is not subject to withholding. People who are self-employed pay estimated taxes, as do those with large stock dividends, interest or assets. If you are a salaried employee and you don’t have enough tax withheld, you may want to pay estimated taxes to avoid paying a penalty. In this case, you should simply change your withholding on your W-4, Employee’s Withholding Allowance Certificate, to avoid estimated tax payments.

    To pay estimated taxes, you need to figure out how much your adjusted gross income will be for the year. Take into account your taxable income, deductions, taxes and credits.

    You can pay your estimated tax four times a year (based on the IRS dates specified for payment), or monthly. The IRS has set up the Electronic Federal Tax Payment System (EFTPS) to make it easier to make your estimated tax payments.