The IRS requires individuals to pay tax on their income as it is earned or received. Individuals can do this through income tax withholding or estimated tax payments.
Do I have to make estimated tax payments?
If the amount of tax withheld is not enough, or if you received income from other sources, you may be required to make estimated tax payments. Self-employed individuals generally need to pay estimated taxes throughout the tax year.
Estimated payments can be made for both federal and state taxes. To determine the amount of estimated federal payments you should be making, you will need to fill out Form 1040-ES. Please note that this form is NOT available within the program. It will have to be filled out manually. State estimated tax calculation worksheets are available in the corresponding state instruction booklets.
Additional information can be found, here.
How do I enter this within the program?
Federal estimated payments can be entered by following this path within the program:
- Payments & Estimates
- Federal Estimated Tax Payments
State estimated payments can be entered by following this path within the program:
- Payments & Estimates
- State Estimated Tax Payments
How do estimated payments affect the return?
Generally, taxes are paid through either withholding from earned income or by making estimated payments. You may be subject to a penalty if there are not enough withholdings or estimated payments made to cover your tax liability. If you owe $1,000 or more on your federal return, you may be subject to a penalty for underpaying your taxes. You may also be subject to an underpayment penalty if you are required to pay quarterly estimated payments and the payment was not made by the due date. Each state determines their own amount for underpayment penalties.
What if I entered estimated payments and did not make them?
If estimated payments are entered into the return and the IRS does not have record of those payments, your return could be adjusted by the IRS and penalties and interest charges could be applied.
Is the amount I paid last year to the IRS on my return an estimated payment?
No. The amount paid for the previous tax return's liability is not considered an estimated payment.