The term estimated tax is a term that is used to describe the method in which is utilized in order to pay tax on income that is not subject to withholding. Some of the individuals who may be affected by estimated tax procedures are individuals who are self-employed, business owners, interest, dividends, alimony, rent, gains from the sale of assets, prizes and various other awards. An individual may also be subject to estimated tax procedures if the amount of income tax that is being withheld from your salary, pension, or other income does not meet the amount requirements.
Estimated tax is used to pay income tax as well as self-employment tax. Estimated tax may also be used for other taxes and amounts that were reported on your tax return documents. If the individual fails to pay enough money through withholding or estimated tax payments, the individual may be fined some sort of penalty charge. If the individual does not pay the full stated amount by the stated due date of each payment, then the individual is likely to suffer from being charged another penalty regardless of whether or not the individual is due a refund when the individual files their tax return.
The individuals who are required to pay estimated taxes are those individuals who are expected to owe at least one thousand dollars in taxes for that particular tax year even after subtracting withholdings and other tax credits. You may also have to pay estimated tax if you are expecting to have withholding or tax credits that are less than ninety percent of the taxes that are shown on that year’s tax return, or one hundred percent of the taxes that are shown on your previous year’s tax return forms. The previous year tax return forms must cover all twelve months of the previous year.
Individuals who are not affected by estimated tax are those individuals who ask that their current employer take out more than the minimum amount of taxes. By increasing the amount of taxes that come out of your payroll check, you can avoid being affected by estimated tax. In order to do this, you can complete a W-4 tax form. There is a particular line on the W-4 form for you to state an increased amount to be drawn from your payroll check. Estimated tax is not required when the individual has no tax liabilities for the filing year, the individual has been a United States citizen for the whole year, and if the individual’s taxes cover the whole year.
This is the overall information regarding estimated taxes. It is important to consult with a tax professional to determine whether or not you may or may not be affected by estimated taxes. If you follow the tax guidelines carefully, you are likely not to be affected by estimated taxes. You may want a tax professional to look over your tax information in order to determine the correct outcome of your tax situation.