Estimated taxes are paid quarterly on untaxed income. Common examples of such income include self employment profits, earnings from rental property and significant interest and dividend payments. Quarterly estimated taxes are required if the tax owed is expected to be $1,000 or more and the amount of taxes withheld for the year is less than 90 percent of the previous year's tax or 100 percent of the tax from two years previously. Special rules apply for fishers, farmers, some household employers and high-income households.

Tax Computation

Information from the prior year's tax return is used to compute the estimated taxes due for the current year. This information is included with current year earnings on the Estimated Tax Worksheet found in the packet Form 1040-ES. These packets are available by mail from the IRS or online at www.irs.gov. The Estimated Tax Worksheet provides the amount of estimated taxes due each quarter.

Payment By Mail

Payment vouchers for each quarterly payment are included in the Form 1040-ES packet. A completed voucher should be sent with but not attached to payment. Vouchers should be typed or carefully printed. Taxpayer names and Social Security numbers should be listed in the same order as on the tax return. The current address should be used. Mailed payment must be in the form of a check or money order. The primary taxpayer's Social Security number and "1040-ES" should be written on the check or money order. Payments should be made to "United States Treasury." Payment amounts should include figures for each number, even the cents. If the amount is even, use two zeros to represent no cents. Quarterly payments are due to the IRS by April 15, June 15, Sept. 15, and Jan. 15. The Jan. 15 payment can be skipped if the tax return and all taxes due are paid by Feb. 1. The state where the taxpayer lives determines which of the nine IRS post office boxes is to receive the estimated tax payments. These locations are listed in the Form 1040-ES packet. Use only the U.S. Postal Service because private postal companies cannot deliver to post office boxes. Taxpayers should keep a record of the date and amount paid for each quarter. Keeping a copy of the canceled checks or processed money orders is also recommended.

Payment By Internet or Phone

Before making payment online or by phone, complete a Form 1040-ES packet to determine the amount of estimated taxes due. Electronic funds withdrawal of estimated taxes is available at no charge to taxpayers when they filed the previous year's taxes electronically. The payments can be scheduled up to one year in advance and can be canceled 48 hours before payment is to be withdrawn. Savings or checking accounts can be used. Electronic notification is sent to the taxpayer when the payment has been withdrawn. Consult your tax professional or tax software, as each has a different method of scheduling these payments. Payment by credit card is available using either of two IRS partners. Both have telephone and Internet options and charge a convenience fee. A confirmation number is provided as proof of payment. Official Payments Corporation is available online at www.officialpayments.com and by telephone at 1-800-272-9829. Link2Gov Corporation can be contacted online at www.pay1040.com and by phone at 1-888-729-1040. Each partner will lead the taxpayer through the process in its own way.

Source:

IRS Form 1040-ES

More Information:

IRS Publication 505 Chapter 2