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Do I have to make estimated tax payments to the IRS?
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| Tax must be paid as income is earned or received.
Tax is generally
withheld from your wages or salary before you get it, and tax may also be withheld from other
types of income such as pensions and unemployment compensation if requested. Paying
estimated tax is the method of paying tax on income not subject to
IRS withholding and on
other income from which not enough IRS tax is withheld. If you are going to owe
the IRS tax
for 2012 you can either increase the amount of tax withheld from your pay or make
estimated tax payments. You may change the amount of tax withheld from your pay by
filing a new Form W-4, Employee's
Withholding Allowance Certificate. Form 1040-ES, Estimated Tax
for Individuals, has a worksheet to see if you need to make estimated tax payments.
Tax is generally not withheld from income such as alimony, interest, dividends, rental
income, self employment income, and capital gains. You may be required to pay estimated
tax on these types of income. You do not have to make estimated tax payments if your 2012
tax return will show a tax refund, or a balance due of less than $1,000.
Generally, you should make estimated
tax payments for 2012 if you will owe the IRS tax of
$1,000 or more, after tax withholding and tax credits, and the total amount of
tax withheld and
your tax credits will be less than the smaller of:
 | 90% of the tax to be shown on your
2012 tax return; or |
| 100% of the tax shown on your
2012 tax return, if your tax return covered all 12
months of the tax year. However, if your 2011 adjusted gross income exceeded $150,000, or
$75,000 if you filed a separate tax return from your spouse, then you must pay
110% instead of
100% of last year's tax. |
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| The percentage for those with income that exceeds $150,000 in
the tax years 1997 and thereafter is as follows : |
| For
tax year 1997 |
110 percent |
| For
tax year 1998 |
100 percent |
| For
tax year 1999 |
105 percent |
| For
tax year 2000 |
105 percent |
| For
tax year 2001 |
105 percent |
| For
tax year 2002 |
112 percent |
| For
tax year 2003 and later |
110 percent |
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You may have to pay a tax penalty if you do not pay enough
tax paid through
withholding or estimated tax payments to the IRS, or if you fail to make required estimated
tax
payments to the IRS by the estimated tax due dates below. Estimated tax payments can be used to pay federal income
tax, self employment tax, and household employment tax. The underpayment tax penalty will not
apply if you had no tax liability for 2011 and you were a U.S. citizen or resident for all
of 2011 and your tax year included all 12 months of the year.
Also, the tax penalty may be waived if:
| The failure to make estimated
tax payments to the IRS was caused by a casualty, disaster, or other
unusual circumstance and it would be inequitable to impose the tax penalty; or |
| You retired (after reaching age 62) or became disabled during the tax year a payment was
due or during the preceding tax year, you had reasonable cause for not making the
estimated tax payments,
and the tax underpayment was not due to willful neglect. |
| For estimated tax payments due on or before August 21, 1998, the
tax penalty is waived to
the extent your tax underpayment was created or increased by the IRS Restructuring and Reform
Act of 1998. |
Get Form
1040ES to help
you figure your estimated tax liability for 2012.
A tax underpayment can be reduced or eliminated by making an additional
tax payment to the IRS at any
time during the tax year. Alternatively, request that your employer withhold additional
tax
from your wages for the remainder of the tax year. Any additional withholding tax will be
treated as having been paid equally throughout the tax year for purposes of determining the
tax
underpayment penalty. If you choose this option, the increased tax withholding will continue
until your employer is notified to revise the amount.
Your first estimated tax payment
to the IRS for 2012 is due April 15th. You may pay the entire
year's estimated tax at that time, or you may pay your estimated tax in four payments.
The four payments are due April 15th, June 15th, September 15, and January
15, 2013.
Underpaying any tax installment may cause
a tax penalty to be assessed, even though the total
estimated tax payments for the tax year are adequate. If you made unequal
estimated tax payments because
your taxable income was received unevenly during the tax year, you may be able to avoid or lower the
tax
penalty by annualizing your income. Use Form 2210, Underpayment of
Estimated Tax by Individuals and Fiduciaries, to see if annualizing would reduce or
eliminate the tax penalty.
Estimated tax payment requirements are different for farmers and fishermen.
Estimated tax payments should not be sent with or be included in checks or money orders
for payment of federal income tax with your tax return. Mail your estimated tax payments
separately to the address shown in Where should I send
my estimated payments?
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Related information
about estimated tax payments |
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Where should I send my estimated
tax payments?
What is form W-9 and backup tax
withholding?
What are the tax penalties and interest? Can they be
avoided?
Is there a way to have tax
withheld from unemployment compensation?
Payments and Refunds |
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IRS publications about estimated IRS tax payments:
For more information about estimated tax payments, see
IRS Publication
505, Tax Withholding and Estimated Tax. Also see
IRS Publication 17, Your Federal
Income Tax. |
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Ask Julian Block your IRS and tax questions! |
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If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
call Julian for a tax consultation click
here. |
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