It depends. If you receive significant non-wage income, such as from self-employment or investments, you will likely need to pay quarterly estimated taxes or run the risk of underpayment penalties in addition to a large year-end tax bill. If you’re at risk for an underpayment penalty next year, TurboTax will automatically calculate quarterly estimated tax payments and prepare vouchers (Form 1040-ES) for you to print.
If you are self-employed, federal, state, and Social Security taxes aren't taken out of the income you receive. Instead of paying the entire amount you owe in April, setting up estimated tax payments gives you the flexibility to make four smaller payments during the year.
There are other types of income where taxes also aren't withheld. You'll want to consider making estimated tax payments when you receive significant income from the following sources:
- Alimony
- Dividends
- Earnings from a business
- Gains from the sale of stock or other assets
- Interest income
- Rental income
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