Typically employees have taxes withheld by their employer throughout the year. For taxpayers with income from interest, dividends, alimony, rent, partnerships, self-employment and capital gains may need to make estimated payments. Taxpayers with this scenario can avoid making estimated tax payments by adjusting Form W-4 and rely on their employer's payroll department to withhold additional taxes.
In general, you must make estimated payments during the tax year if you expect to owe at $1,000 in tax for 2011 after subtracting withholding and credits, and you expect your withholding and credits to be less than the smaller of:
- 90% of the tax shown on your 2011 tax return; or
- 100% of the tax shown on your 2010 tax return.
To avoid potential underpayment penalties, you are required to deposit by payroll withholding or estimated tax payments an amount equal to the lesser of:
- 90% of the current year's tax liability; or
- 100% of the prior year's tax liability or, if your AGI exceeds $150,000 ($75,000 for taxpayers filing Married Separate), 110% of the prior year's tax liability.
The due dates for estimated taxes are divided into four payment periods. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.
|For the period:||Due date:|
|Jan. 1 – March 31||April 15|
|April 1 – May 31||June 15|
|June 1 – August 31||September 15|
|Sept. 1 – Dec. 31||January 15|
Please refer to IRS Publication 505 Tax Withholding and Estimated Tax, for more information. Use the IRS Withholding Calculator to determine how many dependents you should claim, which will affect the amount of taxes withheld from your paycheck.