Many of our clients find themselves burdened with a tax debt because they did not keep up on their Estimated Tax Payments (ETPs). Most people think that ETPs are only for the self-employed. But did you know that you may be required to make ETPs even if you are a wage earner and your employer withholds taxes from your pay?
According to IRS Form 1040-ES, “Estimated tax is the method used to pay tax on income that is not subject to withholding.” You must pay estimated tax in 2012 if both of the following apply:
- You expect to owe at least $1,000 in tax for 2012, after subtracting your withholding and refundable credits.
- You expect your withholding and refundable credits to be less than 90% of the tax on your 2012 return or less than 100% of the tax on your 2011 return, whichever is smaller.
This is just the general rule. Special rules apply to farmers, fishermen, household employers, and higher income taxpayers. The instructions for Form 1040-ES explain how to calculate the amounts of your ETPs and the due dates are as follows:
- 1st Payment – April 17
- 2nd Payment – June 15
- 3rd Payment – September 17
- 4th Payment – January 15