Taxes are pay-as-you-go. This means that the taxpayer needs to pay most of their tax during the year, as they receive income, rather than paying at the end of the year.
There are two ways to pay tax:
- Withholding from pay, pension, and certain government payments, such as Social Security.
- Making quarterly estimated tax payments during the year.
To avoid a penalty for paying too little during the year, 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 withholdings 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 tax withheld from their sources of income. Taxpayers who do not make required estimated tax payments, or do not have enough tax withheld from their income, could be subject to penalty for underpayment of estimated tax, even if they are due a refund on their tax return.
A taxpayer is required to pay estimated tax if they expect to owe $1,000 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 the taxpayer paid to the IRS during the tax year 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 tax payments line of Form 1040.
Note that the xx in 20xx represents the current tax year, i.e. 24 or 2024.
This is a guide on entering estimated payments made into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
Instructions for Form 1040-ES, Estimated Tax for Individuals