Make Estimated Tax Payments
Make estimated tax payments when you have income that is not subject to tax withholding. You can avoid penalties you would otherwise incur for underpaying your taxes.
Instructions
Estimating - Method 1
1. Determine your expected adjusted gross income. Do this by taking last year's income and adjust according to anticipated changes.
2. Subtract your expected deductions and exemptions to obtain your expected taxable income. Again, use last year's figures as a base.
3. Calculate the expected tax according to the tax table or tax schedules.
4. Subtract your expected credits.
5. Add any expected additional taxes. Self-employment Social Security taxes are the most common additional taxes.
6. Subtract your expected tax withholdings. What is left should be paid in estimated tax payments.
Estimating - Method 2
7. Multiply the total tax shown on your last year's tax return by 90 percent. For the tax year 2001, the last year is 2000.
8. Verify the total tax shown on your year-before-last tax return. For the tax year 2001, the year before last is 1999.
9. Determine the smaller of 100 percent of your tax for the tax year before last or 90 percent of your tax for last year.
10. Subtract your expected tax withholdings. What is left should be paid in estimated tax payments.
Sending In Estimated Tax Payments
11. Obtain Form 1040-ES. Go to the local Internal Revenue Service office to get it, or order it by mail, phone or the Internet. It will come with four payment vouchers.
12. Divide your total amount of estimated tax payments by 4. You will be making four equal payments.
13. Send in the first payment with a 1040-ES voucher before April 16, 2001.
14. Send in the second payment with a 1040-ES voucher before June 15, 2001.
15. Send in the third payment with a 1040-ES voucher before September 15, 2001.
16. Send in the last payment with a 1040-ES voucher before January 15, 2002.
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