The most frequently asked question we receive is this: “Now that I am
self-Employed, must I pay estimated tax?” Following are some hints that
may help you answer that question.
You may need to pay estimated taxes if you are self-employed, have
income other than your salary or you receive income that is not subject
to withholding. This might include:
Self-employed income
Rental Income
Interest & Dividends
Alimony/Maintenance Income
Prizes and Awards
You also may have to pay estimated tax if not enough income tax is being
withheld from your salary, pension or other income.
*Who must pay estimated taxes *depends on your personal situation.**In
most cases, you must pay estimated tax if both of the following apply:
You expect to owe at least $1,000 in tax after subtracting your
withholding and credits, and
You expect your withholding and credits to be less than the smaller of:
90% of the tax to be shown on your tax return, or
100% of the tax shown on your previous year tax return.
*Estimated tax is not required*if all three of the following conditions
apply:
You have no tax liability for the prior tax year.
You were a U.S. citizen or resident for the whole year.
Your prior tax year covered a 12-month period.
Estimatedtax payments are generally paid in four equal installments.
However, you may have unequal payments in some circumstances:
If your refund was credited to your estimated tax payments.
If you didn’t compute your estimated payments until after April when the
first estimated payment was due.
If you unexpectedly received a higher than normal amount of money during
one quarter.
