, Answering FAQ'sTurboTax Employee
Generally, you should make estimated tax payments if you:
- Are self-employed;
- Expect to receive significant income from non-wage sources such as retirement accounts, rental income, stock sales, interest, dividends, alimony, etc.;
- Expect to lose a significant deduction or credit. For example, if you deducted mortgage interest in the past but you recently paid off your mortgage.
You can use TurboTax to determine whether you need to pay estimated tax. If you do, TurboTax will figure the payments and even print the vouchers for you.
The United States tax system is a "pay-as-you-go" system, which means that tax is supposed to be paid on income as you receive it. That's why employers withhold income tax from each paycheck.
However, if you receive income outside of employment, there is no employer to take care of the withholding. It's up to you to make estimated tax payments on that income if you want to avoid possible underpayment penalties.
Underpayment penalties are assessed if you don't withhold or pay enough tax on income received during the quarter.
In fact, it's entirely possible to get hit with an underpayment penalty if the IRS owes you a refund (or if you pay your entire tax bill) when you file your return!
Due dates for federal payments
In TurboTax, these due dates as well as the IRS mailing address are included in the Filing Instructions, which print out along with your federal return. Also note that the second and fourth quarters are 2 months and 4 months long, respectively.
Calculating and preparing your estimated tax payments
TurboTax will tell you whether you need to pay quarterly estimated tax and will figure the payments for you.
- In TurboTax, click Federal Taxes (Personal tab in Home & Business) and then click Other Tax Situations.
- Scroll down to Form W-4 and Estimated Taxes and click Start.
- Answer No to the question about changing your W-4 withholdings.
- Follow the on-screen instructions to determine if you need to make estimated tax payments; or
- Click Prepare Now if TurboTax recommends that you make estimated tax payments.
If you choose to print your estimated tax vouchers (Form 1040-ES), they will print as part of your federal return.
The IRS mailing address and due dates for the payments will be in the Payments You Need To Make section of the Filing Instructions document, which also prints with your return.