Paying Estimated Taxes - Form 1040ES for 2010

My office is often asked this question, "Why do I have to pay estimated taxes?"

As a general rule, you must pay taxes if both of the following apply to your situation.

1. You expect to owe at least $1,000 in tax for 2010

and

2.  You expect your federal withholding and refundable credits to be less than the smaller of:

     a. 90% of the tax to be shown on your 2010 tax return (We are speaking about your federal taxes only, i.e. forms 1040, 1040A, 1040EZ...)

     or

     b. 100% of the tax shown on your 2009 tax return.

You are exempt from this if you were a US Citizen for 2009 or a Resident Alien for 2009, and didn't have to file a tax return for 2009 or had no tax and therefore no taxable income for 2009.

For everyone that makes oer $150,000 or $75,000 if married filing separately, substitute 110% for the 100% listed above.  This is the IRS's rules for higher income taxpayers.

Federal Form 1040ES due dates are quarterly and due on the 15th or next business day after the 15th if it falls on a weekend in the following months, April, June, September, & January.

If you mail your payment and it is postmarked by the due date, the post mark is considered the date of payment.  Be careful, the IRS is referring to the US Postal Service postmark, not the date you stamped the envelope in your office.

You can also pay your estimated taxes via the IRS's EFTPS, by Check using the EFW system at the IRS or through a third party and use your credit card.  These third parties do charge a convenience fee so beware.