The IRS expects you to pay estimated taxes during the year to cover all types of income (wages, self-employed income, retirement income, interest, dividends, capital gains) if you think that withholding taxes and refundable credits are insufficient to cover your tax liability under certain rules.
The IRS says:
Generally, you must make estimated tax payments for the current tax year if both of the following apply:
- You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits.
- You expect your withholding and refundable credits to be less than the smaller of:
- 90% of the tax to be shown on your current year’s tax return, or
- 100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)
Please read this IRS FAQ for more information.
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