If you make estimated tax payments this is something you might want to read.
Most taxpayers that owe money to the IRS do so simply because they fail to make their estimate tax payments.
Since self employed individuals do not have withholding taken out of their checks, the ES or Estimated payments are the easiest and best way to make sure you do not have a large tax payment the end of the year.
You may need to pay estimated taxes to the IRS during the year if you have income that is not subject to withholding.
These tips from the IRS explain estimated taxes and how to pay them.
1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
2. You must pay estimated taxes in 2012 if both of these statements apply:
1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and tax credits, and
2) You expect your withholding and credits to be less than the smaller of 90 percent of your 2012 taxes or 100 percent of the tax on your 2011 return. Special rules apply for farmers, fishermen, certain household employers and certain higher income taxpayers.
3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year.
You can use the worksheet in Form 1040-ES, Estimated Tax for Individuals, for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15 of the next or following year. Depends of holidays.
6. Form 1040-ES, Estimated Tax for Individuals, has everything you need to pay estimated taxes.
It includes instructions, worksheets, schedules and payment vouchers. However, the easiest way to pay estimated taxes is electronically through the Electronic Federal Tax Payment System, or EFTPS, at www.irs.gov. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.
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