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.
Taxpayers should ensure that they remit 1/4 of current year total tax assessment on IRS stipulated due dates. Failure to make timely quarterly payments may result in late fees and/or penalties being assessed on the actual tax return. If a taxpayer determines that taxable income will increase in the next tax year, they will want to pay 110% of current year tax in quarterly installments.
To generate payment vouchers (1040-ES) for Estimated Payments in ProWeb select:
- Federal Section
- Payments & Estimates
- Vouchers for 20xx Estimated Tax Payments
To enter the amount of estimated payments that were made for the current year select:
- Federal Section
- Payments & Estimates
- Federal Estimated Tax Payments - Enter the amounts that the taxpayer paid for each quarter in the fields provided.
Note: This is a guide for printing Estimated Tax Payment Vouchers in PROWEB. It is not intended as tax advice.
Additional Information:
Instructions for Form 1040-ES, Estimated Tax for Individuals