Estimated Taxes
The method used for estimated taxes used to pay on income that is not subject to witholding.
This includes income from self-employment, intrests, 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 witheld
from your salary, pension, or other income is not enough.
Estimated taxes 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 through witholding or estimated
tax payments, you may have to pay a penalty. If you do not pay enough by the due date of each payment period
you maybe charged a pentaly even if you are due a refund when you file your taxes.
Who Must Pay Estimated Tax
If you have a tax liabilty for 2009, you may have to pay estimated tax for 2010. General rule.
You must pay estimated tax for 2010 if both of the following apply:
1. You expect to owe at least $1,000 in tax for 2010 after subtracting your witholding and credits.
2. You expect your witholding and credits to be less than the smaller of:
a. 90% of the tax to be shown on your 2010 tax return, or
b. 100% of the tax shown on your 2010 tax return. Your 2010 tax return must cover all 12 months.
Estimated Taxes
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Tax Topics
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