Chapter 27

Estimated Tax Payments

Income taxes are collected on a pay-as-you-go basis through withholding on wages and pensions, as well as quarterly estimated tax payments on other income. Where all or most of your income is from wages, pensions, and annuities, you will generally not have to pay estimated tax, because your estimated tax liability has been satisfied by withholding. But do not assume you are not required to pay simply because taxes have been withheld from your wages. Always check your estimated tax liability. Withholding may not cover your tax; the withholding tax rate may be below your actual tax rate when considering other income such as interest, dividends, business income, and capital gains.

Your estimated tax must also include liability for self-employment tax, alternative minimum tax (AMT), and FICA withholding tax for household employees.

If you expect your 2013 tax liability to be $1,000 or more after taking into account withholding taxes and credits, you should make quarterly estimated tax payments unless you expect the withholdings and credits to be at least 90% of your 2013 total tax, or, if less, 100% or 110% of your total tax for 2012. The 100% test applies if your 2012 adjusted gross income (AGI) was $150,000 or less, $75,000 or less if married filing separately in 2013. The 110% test applies if your 2012 AGI exceeded the $150,000 or $75,000 threshold.

Failure to pay a required estimated tax installment will subject you to a penalty based on the prevailing IRS interest rate applied to tax deficiences, unless the IRS waives the penalty.

27.1 Do You Owe an Estimated Tax Penalty for 2012?

27.2 Planning Estimated Tax Payments for 2013

27.3 Dates for Paying Estimated Tax Installments for 2013

27.4 Estimates by Husband and Wife

27.5 Adjusting Your Payments During the Year