How to Figure Estimated Taxes
Estimated taxes are the government's way of making sure you pay your taxes throughout the year so that you don't have to face an extremely large tax bill when April 15 rolls around. It is used for income that is not subject to withholding taxes, such as self-employment income or alimony.
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Instructions
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Determine if you need to pay estimated taxes. If you expect to owe at least $1,000 in taxes after any withholding taxes and credits have been subtracted, you need to pay estimated taxes. You will also need to do so if your withholding and credits are less than the smaller of 90 percent of the tax to be shown on your current year's tax return or 100 percent of the tax shown on your previous year's tax return. Likewise, small-business owners will need to file estimated taxes for their business income.
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Make an estimate of your expected income. Tally up your projected income and subtract projected expenses. The estimate needs to be close enough to the actual income that the taxes you pay will be at least 90 percent of the actual amount of taxes owed.
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Fill out Form 1040-ES. Based on your estimated income, the form calculates what the income taxes are on the amount, taking into account some credits. The final amount of estimated taxes is divided by four. This will be your quarterly estimated tax payment.
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Fill out the first-quarter payment voucher and pay the amount by April 15. Your other quarterly payments will be due June 15, Sept. 15 and Jan. 15 of the following year.
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