Tax Resources
 

Estimated Tax

What is estimated tax?

The definition of estimated tax is given by the IRS. The IRS defines estimated tax as the method used to pay tax on income that is not subject to income tax withholding.

What does estimated tax include?

Estimated tax includes:

  • income from self employment
  • interest income
  • dividend income
  • alimony received
  • rent received
  • gains from the sale of assets
  • prizes and awards
  • excess wages and salaries with not enough withholding
What are estimated tax used for?

Estimated tax is used for paying income tax and self employment tax as well as other taxes owed to the IRS.

I did not have enough tax withholding and did not pay estimated tax, what happens?

If you did not have enough tax withheld and you did not pay estimated tax throughout the year, then the IRS can assess a penalty for not paying estimated tax and not paying enough tax during the tax year.

Tax Questions