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Do I Need To Pay Estimated Taxes?

Although your tax return is not "due" until April 15th of the following year, you are generally required to prepay your tax during the year.

In order to avoid an underpayment penalty when filing your return, you must pay in at least the lower of (1) 90% of your current year's tax liability or (2) 100% of your previous year's tax liability all over again. (Note: If your AGI last year was $150,000 or more - or $75,000 if married filing separately - 112% for 2003 and beyond.) These payments may be made by having income tax withheld (in any proportion during the year), or by making four estimated tax payments with Form 1040-ES.

If you need to recompute your withholding, obtain a copy of Form W- 4 from your employer. This form contains a worksheet that allows for most circumstances, and tells you what withholding status and how many "withholding allowances" to claim. Note: that your status on Form W-4 could very well be different than your marital status, and the allowances different than the exemptions you are allowed to claim on your actual return. Form W-4 explains how this is done. Generally, if a couple is married filing jointly and both work, the number of allowances they claim in total will be less than they claim on the return itself.

If you have income that is not subject to withholding, and your tax shortfall will be more than $1,000, you need to file Form 1040-ES and make estimated tax payments during the year. These payments are due on April 15, June 15, September 15 and on January 15 of the following year (If a payment date falls on a weekend, the next Monday is the due date). The worksheet that accompanies the form explains the calculations. Generally, each payment should include the taxes you will owe for the period that ended the previous month; for example, the June 15 payment is for the two months ending May 31.


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We do not offer legal advice. All information provided on this website is for informational purposes only and is not a substitute for proper legal advice. If you have legal questions, we recommend that you seek the advice of legal professionals.

Tax Disclaimer: To ensure compliance with IRS Rules, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.

Copyright 2017 Wink Tax Services / Wink Inc.
Last modified: January 30, 2017