1099 Form from arbitration settlement -- Should I pay estimated tax during the year of settlement?

[bashuzi]

I received payments from the previous employer as a result of employer/employee arbitration.  Part of the payment was a W-2 payment and tax was withheld from this portion.  The other part was a 1099 payment and there was no tax withheld.  My question is, do I need to calculated estimated tax on the 1099 portion of the payment and pay estimated tax in the year I received the settlement?  Or I only need to make the tax payment when I file tax return in the following year?

[tagteam]

@Critter-3 can probably answer this one.

[Cynthiad66 · Accepted solution]

It depends on your situation. The rule is that you must pay your taxes as you go throughout the year through withholding or making estimated tax payments.

Below are situations to help you determine if you should pay estimated tax payments.

•  If you expect to owe more than $1,000 in federal taxes for the tax year, you may need to make estimated quarterly tax payments using Form 1040-ES, or else face a penalty for underpayment.
   
• If your federal income tax withholding (plus any timely estimated taxes you paid) amounts to at least 90 percent of the total tax that you will owe for this tax year, or at least 100 percent of the total tax on your previous year's return (110 percent for AGIs greater than $75,000 for single and separate filers and $150,000 for married filing joint), you most likely will not need to make estimated tax payments.
   
•  If you don't calculate and pay your first estimated payment until after April 15, when the first quarterly payment is typically due, then you will need to make your payments as soon as you can to “catch up" but you might still have a penalty.

This link below provides information on calculating your estimated payments.

Should I Pay Estimated Taxes