Estimated Tax Payments are required advanced payments of current tax liability based either on wage withholdings or installment payments of a taxpayer's estimated tax liability.
To avoid penalties, a taxpayer generally must pay to the IRS either 90% of their final tax liability, or either 100% or 110% of their prior year's tax liability, depending on their adjusted gross income.
Estimated payments should be made on income from self-employment, interest, dividends, alimony, rental income, gains from the sale of assets, and prizes and awards. Estimated payments can also be made if a taxpayer's withholding will not cover the total amount of tax due at the end of the tax year.
If a taxpayer makes estimated payments, it should be reported on their individual tax return along with any taxes that were withheld from their sources of income. Taxpayers who do not make required estimated tax payments, or do not have enough taxes withheld from their income, could be subject to penalties, even if they are due a refund on their tax return.
Taxpayers filing as a sole proprietor, self-employed individual, partner, or S corporation shareholder are required to pay estimated taxes if they expect to owe taxes of $1000 or more when they file their tax return. If a taxpayer had a tax liability in the previous tax year, they may be required to make estimated tax payments for the current tax year.
To enter estimated payments in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Payments, Estimates, & EIC
- Estimated Payments Made for 20xx - Enter any payments the taxpayer made from their prior year tax return, as well as quarterly payments made directly to the IRS. Any amounts entered in this menu will appear on the estimated taxes paid line of Form 1040.
Note that the xx in 20xx represents the current tax year, i.e. 21 or 2021.
This is a guide on entering Estimated Payments made into the TaxSlayer Pro program. This is not intended as tax advice.
Instructions for Form 1040-ES, Estimated Tax for Individuals