Q. What is the Estimated Income tax?
A. Income tax is a pay-as-you-go tax. This means that you must pay taxes as you earn or receive income during the year
There are two ways to do it…
Q. Why should I pay estimated tax? Is it not enough to wait and file my tax returns paying the balance due?
A. Because if you do not pay enough by the due date of each payment you may be charged a penalty even if you are due a refund when you file your tax returns.
Q. When shall I pay the estimated tax?
A. Generally, payment of estimated tax is due on: April 15, June 15, September 15 of the current fiscal year and, January 15 of the following.
Q. How much should I pay?
A. An easy way to figure out how much to pay is to take your previous year tax payments (the amount you paid when you filed your tax returns) and divided by four: take those as your quarterly installment payments and they will probably cover your tax liabilities unless you earned an unexpected income.
The alternative, (for first time filers, for instance) is to project the amount of income you expect to receive and apply Tax Rates and deductions/credits.