Are estimated taxes really estimates?
Not exactly. Think
of them as prepayments and all taxpayers are required to make them. If
you have a job, your employer withholds federal income tax from each
paycheck. Withholdings are prepayments. However, if you are an independent contractor, you don’t have an employer to withhold taxes. So, you must make direct payments to the IRS. Those are known as estimated tax payments. The prepayment requirement applies to anyone who will owe more than $1,000 when they file their tax returns. Here are some examples:
Important. Many states also have estimated tax requirements. |