Estimated Tax Payments

If you are a small business owner or someone who receives a large amount of investment or pension income, chances are good that you will have to make estimated tax payments.

Estimated tax payments are used to pay tax on income that is not subject to withholding. This, of course, includes income from self-employment (estimated tax payments cover both income tax and self-employment tax).

Even if you receive a salary from a job you hold in addition to running your own business, you may still have to make estimated tax payments if the amount of tax being withheld from your salary is insufficient.

There are generally five basic issues to be considered when dealing with estimated tax payments:

• Who must make estimated payments?
• How do you compute the amount of each payment?
• How do you make the required payments?
• When are they due?
• Should you file your taxes early in lieu of making the last payment?