The IRS requires taxpayers to submit an estimated tax for the taxable year on the income not included in the withholding tax by using Form 1040-ES. This includes income from contract work, self-employment, alimony, dividends, rents, and the like.
Estimated payments are required if:
- Tax payers owe a minimum of $1000.
- The sum of tax credits and withholding is below 90% of the person’s total tax.
Form 1040-ES enables a taxpayer to compute and pay the tax for income that is not subjected to withholding. It is necessary for a taxpayer to have the tax return at hand when filling up the IRS Form 1040-ES. It has two pages that gather information as regards to the taxpayer, income items and income adjustments, as well as the list of dependents. The calculations on the credits and allowable deductions, outstanding tax, and withheld funds from estimated payments and wages are also included. Presidential election campaign fund check off is on the top page, allowing the taxpayer to allocate the $3 tax the federal government collects to the fund for the presidential campaign.
This Form has 11 schedules or attachments. Schedule M is also added for tax years 2009 and 2010. If voluntary withholding is not your preference, it is important to make the estimated payments for the social security benefits, in addition to, unemployment compensation.
By using Form 1040-ES, self-employed individuals avoid tax penalties because they can refigure their estimated tax payments.
Category: Tax Return Forms, Tax refund, Tax deductions.
Link to IRS website: http://www.irs.gov/pub/irs-pdf/f1040es.pdf