What are estimated tax forms used for?


Quick Answer

Estimated tax forms, also known as Form 1040-S, are used for self-employed wages, alimony payments, interest dividends and other forms of income that aren't withheld, according to the IRS. Individuals should also make estimated tax payments for any portion of social security that's taxable and for unemployment compensation.

Continue Reading

Full Answer

In addition to self-employed wages, rent, rewards and prizes, an individual may need to make estimated tax payments if any income tax withheld from his wages isn't enough to satisfy his tax payments, notes the IRS. Those who fail to pay taxes with estimated payments or withholding may be subject to a penalty.

To calculate estimated tax payments, an individual must first calculate his taxable income, adjusted gross income, credits and deductions, says the IRS. Figures for the previous year can be used as a point of reference for calculating estimated tax payments, then adjusted to account for an increase or decrease in the current tax year's income.

Estimated payments are made four times a year, according to the IRS. Individuals who fail to pay the required payments by a specific due date can be charged a penalty, even if they overestimate and pay too much tax. Individuals can use the Electronic Federal Tax Payment System to make estimated tax payments.

Learn more about Taxes

Related Questions