Quarterly Estimated Taxes
Estimated tax is a method of paying tax on income that is not subject to withholding tax. This can include income from self-employment, business earnings, interest, rent, dividends and other sources. The IRS requires estimated tax to be paid quarterly, typically in 4 equal installments.
The following types of people are generally required to make estimated tax payments:
Self-Employed Persons or Sole Proprietor Business Owners. Those who have income from their own business will need to make estimated tax payments if their tax liability is expected to be more than $1,000 for the year. This includes both part-time and full-time enterprises.
Partners, Corporations, and S Corporation Shareholders. Business ownership earnings usually will require estimated tax payments. In the case of corporations, estimated tax payments must be made if the corporation is expected to have at least $500 in tax liability.
People Who Owed Taxes for the Prior Year. If you owed taxes at the end of last year, it probably means that too little was withheld from your paychecks, or you had other income that increased your tax liability. This is a flag to the IRS that you should be making estimated tax payments.