If you are filing as a sole proprietor, partner, S corporation shareholder,
and/or a self-employed individual, you generally have to make estimated tax
payments if you expect to owe tax of $1,000 or more when you file your return.
If you owed additional tax for the prior year (did not have
enough withheld by employer), you may have to pay estimated tax for the current
year.
General rule. In most cases, you must pay estimated tax for
the current year if both of the following apply.
1) You
expect to owe at least $1,000 in tax for the current year, after subtracting
withholding and refundable
credits, and
2) You
expect your withholding and refundable credits to be less than the smaller of:
a) 90%
of the tax to be shown on your current year tax return, or
a) 100%
of the tax shown on your previous year’s tax return, if your previous year’s
return covered all 12 months.
Note: The
percentage amounts may be different if you are a farmer, fisherman, or
higher-income taxpayer.
Who Does Not Have to Pay Estimated Tax
If you receive salaries and wages, you can avoid having to
pay estimated tax by asking your employer to withhold more tax from your
earnings. To do this, file a new Form W-4 with your employer. There is a
special line on Form W-4 for you to enter the additional amount you want your
employer to withhold.
You do not have to pay estimated tax for the current year
if you meet all three of the following conditions.
• You had no tax liability for the prior year,
• You had no tax liability for the prior year,
• You
were a U.S. citizen or resident for the whole year, and
• Your
prior tax year covered a 12 month period.
You
had no tax liability for the prior year if your total tax was zero or you did
not have to file an income tax return.
