Federal 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 the tax to be calculated 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 reported on tax documents such as Forms W-2, W-2G, 1099-G, 1099-MISC, 1099-NEC, 1099-R, and SSA-1099. Taxpayers who do not make required estimated tax payments, or do not have enough taxes 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 filing as a self-employed individual, partner, or S corporation shareholder are required to pay estimated taxes if they expect to owe taxes of $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.
Calculating estimated payments for the upcoming year
You can use the Estimates Calculator to project how much your client should pay quarterly toward their federal taxes.
To access the Estimates Calculator, from the Main Menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Generate 20xx Estimates - where XX represents the following tax year.
- Estimates Calculator
Creating and printing federal estimated tax payment vouchers for the upcoming year
To create and print estimated tax payment vouchers to be used with payments that will be made by check in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Generate 20xx Estimates (1040-ES)
- Enter the amount to be paid in each quarter
- Click the View icon in the toolbar at the top of the window to open the vouchers in PDF form. In your PDF viewer, select File then Print.
Estimates vouchers can also be printed from the View Results menu.
Creating and printing a client copy of the vouchers
In addition to the four quarterly vouchers, you can also configure TaxSlayer Pro to print an additional "client copy only" page that includes information about each quarterly payment. This page can assist the taxpayer in keeping track of when they sent each payment.
To configure TaxSlayer Pro to include the client copy estimates information along with the four payment vouchers, from the Quick Menu of TaxSlayer Pro select:
- Configuration
- Printer/Copies Setup
- Advanced Print Setup
- Print Client Copy of 1040 Estimates - Select and answer YES.
Setting up estimated tax payments by direct debit
Estimated tax payments can be scheduled with the IRS to be made by direct debit. To schedule these payments, from the Main Menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Generate 20xx Estimates (1040-ES) - Enter the amount to be paid in each quarter.
- Schedule 20xx Estimated Payments for E-File - Answer YES to the question confirming you would like to do this.
- Enter the 9-digit routing number (RTN), account number, and indicate whether the account is a checking account or savings account.
- Before exiting the window, confirm the information is correct
Note: The IRS will not confirm that the direct debit arrangement has been set up nor provide advance notice to the taxpayer prior to debiting their account.
Creating and printing state estimated tax payment vouchers for the upcoming year
To print State Estimated Payments in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- State Return
- Select the state you would like to print the estimated vouchers for.
Because the state forms and menus vary, you may need to use the Form Finder from within the state return to help locate the State Estimated Payment Vouchers.
The Form Findericon at the top the screen
- Search for "estimates" from the list of forms and descriptions.
- Every estimated tax menu includes the menu line Print Estimate Coupons. Select it to print the state estimated payment vouchers.
Some states require the estimated payment voucher to include an amount in order to be printed, due to the voucher containing a bar code that includes all the taxpayer and payment information.
Note: This is a guide on entering estimated payments into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
Instructions for Form 1040-ES, Estimated Tax for Individuals