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 other taxes and amounts reported on your tax return. If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax
on page 22), you may be charged a penalty even if you are due a refund when you file your tax return. For information on when the penalty applies, see chapter 4
It would be helpful for you to have a copy of your 2009 tax return and an estimate of your 2010 income nearby while reading this chapter.
You may want to see:
Form (and Instructions) 1040-ES: Estimated Tax for Individuals taxmap/pubs/p505-010.htm#en_us_publink10007324
See chapter 5
for information about how to get this publication and form.
You may need to use several of the blank worksheets included in this chapter. See Table 2-2
on page 32 to locate what you need.
If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of your earnings. To do this, file a new Form W-4 with your employer. See chapter 1
You do not have to pay estimated tax for 2010 if you meet all three of the following conditions.
- You had no tax liability for 2009.
- You were a U.S. citizen or resident alien for the whole year.
- Your 2009 tax year covered a 12-month period.
You had no tax liability for 2009 if your total tax (defined on page 21 under Total tax for 2009—line 14b
) was zero or you did not have to file an income tax return.