Yesterday a new article was published at the RoniDeutch.com learning center. This new article explains estimated tax payments, and offers answers to a handful of questions related to quarterly tax payments.
Estimated tax payments are a method used to calculate and pay income tax on income that is either not subject to withholding or due as a result of insufficient withholding. Income not subject to withholding includes: Unemployment benefits, Self-employment income, Alimony, Interest, Dividends, Rent, Awards, Prizes, and asset-Sale gains.
As a general rule, if a taxpayer is self-employed or has any other non W-2 income, that taxpayer may need to pay estimated taxes each quarter.
How do I Know if I Need to make Estimates Tax Payments?
By following this chart, you may determine whether or not you need to make Estimated Tax Payments:
1) Do you expect to owe less than $1000 in taxes for 2010 after subtracting withholdings & credits from the total amount of taxes you expect to owe?
If Yes, you do not need to make ETP.
If No, proceed to the next question.
2) Do you expect your withholding to amount to be at least 90% of the tax you will owe for 2010?
If Yes, you do not need to make ETP.
If No, proceed to the next question.
3) Do you expect your withholding to be at least 100% of the tax on your 2009 return?
If Yes, you do not need to make ETP.