Do you get confused as to whether you are required to pay estimated tax? Then you are not alone. This article will explain the requirements for estimated tax liability for individuals and businesses.
Outstanding Tax Liability
Most times, people who have outstanding tax liabilities for the 2009 year are usually required to pay estimated tax for the 2010 year.
General Rules: Individuals Who Pay Estimated Tax
The IRS has set standard rules for individuals that determine whether they are required to pay estimated tax liabilities. That is, there are two conditions that determine whether or not you should pay estimated taxes. They are:
Do you expect to owe a minimum tax of $1,000 for the 2010 year? This includes any credits and withholding that are subtracted.
Do you expect your withholding and credits to be less than:
*100% of tax shown on your 2009 tax return for all 12 months
*90% of the tax on your 2010 tax return.
(The above percentages may vary for people who are farmers, fisherman, or higher income earners.)
*Tip 1: To calculate and pay your estimated tax payments, use Form 1040 ES – Estimated Tax for Individuals.
General Rules: Businesses Who Pay Estimated Tax
Generally, specified businesses are required to pay estimated tax if they are expected to owe a minimum of $1,000 in taxes. The businesses are:
*Tip 2: To calculate and pay your estimated tax payments for your business, use Form 1040 ES – Estimated Tax for Individuals,. Also, please refer to the IRS Publication 505 – Tax Withholding and Estimated Tax for additional information.
General Rules: Corporations Who Pay Estimated Tax
Generally if any corporation is expect to make $500 or more in revenue, then it is required that they pay estimated taxes.
*Tip 3: Use Form 1120 W – Estimated Tax for Corporations, and reference IRS Publication 542, Corporations for more information.
www.irs.gov – Estimated Tax