Individual Income Tax Estimate
Estimated tax is the method used to pay tax on income that is not subject to withholding. Income can enter into our lives in many different ways.
Here are a few examples of individual income you will need to estimate the tax on:
- If you receive rent income
- If you are self-employed
- If you receive alimony, interest, dividends
- Gains from the sale of assets
- If you won prize money
This lists some of the instances in which you will need to estimate tax on income. Of course there are many more. For a more comprehensive list you can search the web site of the IRS or even better, more interesting, and less time consuming, you could run your numbers through an online tax return estimator.
Who Does Not Have to Pay Estimated Tax?
If you receive a salary or earnings from an employer, you do not have to pay estimated tax. You can ask your employer to increase your withholding to make sure enough is being taken out each pay period. I don’t think anybody enjoys finding out you owe Uncle Sam a huge amount at the end of the year.
How to Figure Estimated Tax to Avoid Penalties
Gather up your papers because you will need them. You can take a look at the previous year which could be helpful. You will need to know your expected adjusted gross income, taxable income, taxes, deductions, and credits. A worksheet is available it’s the Form 1040-ES PDF and will help you to calculate your estimated tax.
You will most certainly need to make adjustments if you estimated your income too high or too low. You will want to estimate your income just as close as you can to avoid penalties.
Sole Proprietors, Partners, Corporations, S Corporation Shareholders
If you expect to owe $500 to $1,000 or more when you file your return you generally have to make estimated tax payments. You can read the publications and forms if you think you will understand the tax jargon.
Real Help with the Click of the Mouse
If you would like help estimating your individual tax obligations then, I suggest you visit TurboTax Online. They have tax preparation software that will take your numbers and put them in all the right places on all the right forms for you.
Give the free tax estimator a try today to see how you’re doing. The page updates the refund or amount owed as you enter data. Take the headaches and guess work out of taxes. The Tax Experts are standing by to help you today!