Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.
Estimated tax is used to pay both income tax and self-employment tax, as well as alternative minimum taxes and other taxes and amounts reported on your tax return. If you do not pay enough tax, either through withholding or by making estimated tax payments, or a combination of both, you may be charged a penalty. If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax, later), you may be charged a penalty even if you are due a refund when you file your tax return.
WHO MUST PAY ESTIMATED TAX PAYMENTS?
If you owe additional tax for 2016, you may have to pay estimated tax for 2017. General rule. You must make estimated tax payments for 2017 if both of the following apply.
1. You expect to owe at least $1,000 in tax for 2017 after subtracting your withholding and refundable credits.
2. You expect your withholding plus your refundable credits to be less than the smaller of:
• 90% of the tax to be shown on your 2017 tax return, or
• 100% of the tax shown on your 2016 tax return. Your 2016 tax return must cover all 12 months.
CALL US FOR A FREE TAX CONSULTATION
Selig & Associates provides the most aggressive tax representation allowed by law. Specializing in Trust Fund Recovery Penalty (TFRP) representation, and all payroll, income and sales tax controversies. We settle contested tax audits; negotiate excellent payment plans, compromise tax debts, and resolve all civil and criminal tax issues, including innocent spouse relief and separation of liability.