Federal income tax is a pay-as-you-go tax. This means the tax must be paid as income is
earned or received. Tax is generally withheld from your wages or salary before you get it,
and may also be withheld from other types of income such as pensions and unemployment compensation if requested.
However, tax is generally not withheld from income such as alimony, interest, dividends,
rental income, self-employment income, and capital gains. You may be required to pay estimated
tax on these types of income. Estimated tax is the method of paying tax on income not subject
to withholding and on other income from which not enough tax is withheld. You do not have
to make estimated tax payments if your 2001 tax return will show a refund, or a balance due
of less than $1,000.
Generally, you should make estimated tax payments for 2001 if you will owe tax of $1,000 or more,
after withholding and credits, and the total amount of tax withheld and your credits will be
less than the smaller of:
- 90% of the tax to be shown on your 2001 tax return, or
- 100% of the tax shown on your 2000 tax return, if your 2000 tax return covered all 12 months
of the year. However, if your 2000 adjusted gross income exceeded $150,000, or $75,000 if you
filed a separate return from your spouse for the year 2001, then you must pay 110%
instead of 100% of your 2000 tax.
Refer to Form 1040ES
to help you figure your estimated tax liability for 2001.
Your first estimated tax payment for 2001 is due April 16th. You may pay the entire year's
estimated tax at that time, or you may pay your estimated tax in four payments.
The four payments are due April 16th, June 15th, September 17, 2001, and January 15,
2002. You may have to pay a penalty if you do not pay enough tax through withholding
or estimated tax payments, or if you fail to make required estimated tax payments by
the due dates. Estimated tax payments can be used to pay federal income tax, self-employment tax,
and household employment tax. Topic 306 provides additional information
on the estimated tax penalty.
Estimated tax requirements are different for farmers and fishermen.
Publication 505,
Tax Withholding and Estimated Tax, provides more information
about these special estimated tax rules and about estimated tax in general.
For more information use the interactive Tax Trails
on Do You Have to Pay Estimated Tax. Publications and forms may be downloaded from this site,
or ordered by calling 1-800-829-3676.
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