- The Internal Revenue Service reminds taxpayers who pay estimated taxes that the deadline to pay their second quarter tax liability is June 15.
Taxes are pay-as-you-go
This means taxpayers need to pay most of the tax they expect to owe during the year, as income is received. There are two ways to do that:- Withholding from pay, pension or certain government payments such, as Social Security.
- Making quarterly estimated tax payments during the year.
Estimated tax is the method used to pay tax on income that isn’t subject to withholding. This includes income from self-employment, interest, dividends, rent, gains from the sale of assets,
prizes and awards.Taxpayers may also have to pay estimated tax if the amount of income tax being withheld from their salary, pension or other income isn’t enough. If necessary, those who receive a salary or wages can avoid having to pay estimated taxes by asking their employer to withhold more tax from their earnings. To do this, taxpayers should submit a new Form W-4 to their employer. There is a special line on Form W-4 for them to enter the additional amount they want their employer to withhold.
Who must pay estimated tax?
Individuals, including sole proprietors, partners and S corporation shareholders, generally have to make estimated tax payments if they expect to have a tax liability of $1,000 or more when they file their return.Individual taxpayers can use the IRS Interactive Tax Assistant online to see if they are required to pay estimated taxes. They can also see the worksheet in Form 1040-ES, Estimated Tax for Individuals, for more details on who must pay estimated tax.
Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when they file their return. Corporations can see Form 1120-W, Estimated Tax for Corporations, for more information.
