If you make estimated tax payments, you may be aware that a payment deadline for the third quarter is coming next week. Unless you use a different fiscal year, the payment due date is September 15.
There are often misconceptions, however, about the applicability of estimated tax. Who must pay these taxes and does not have to pay? In this two-part post, we will address that question.
Many people think of estimated taxes in connection with self-employment. But the possible requirement to make estimated tax payments includes income from other sources as well, such as interest income, pensions or profits from the sale of assets.
Indeed, even if you have taxes withheld from your paycheck, you may still need to make estimated tax payments. This could happen if the amount that is withheld isn't enough in order for you to meet your tax obligations.
It is also important to recognize that it isn't only individuals who may be required to pay estimated taxes. There is also an estimated tax for corporations. The form to be used for corporations is Form 1120-W.
For individuals, the form is Form 1040-ES. This is the form for self-employed individuals and other individuals who must make estimated tax payments. This can include the sole proprietor of a business or a business partner. It can also include an S corporation shareholder.
For individuals, the obligation to make estimated tax payments is triggered when there is an expected tax liability of $1,000 or more when it's time to file a return.
In part two of this post, we will look more closely at who is considered self-employed for purposes of making estimated tax payments.