How to Estimate Taxes
If you are wondering how much tax you are going to pay this coming year, then you should learn how to estimate taxes. It is true that there are two things we cannot escape in life: death and taxes, but there are ways that you can ease your pain during tax season every year. This step by step guide will show you how easy it is to estimate taxes.
- Figure out whether you need to estimate taxes or not. Why do all the work when you do not have to? You only need to estimate taxes on those incomes that are not subject for withholding. That means if taxes are already deducted from your monthly pay check, then you do not need to estimate taxes.
- Determine the type of incomes you need to estimate taxes. There is a broad category of incomes that you need to estimate taxes. According to the Internal Revenue Service (IRS), incomes that are from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards are subject for estimating taxes. Furthermore, you should also estimate your taxes if the amount withheld from your salary, pension or other incomes is not enough to meet your tax burden.
- General rules in paying estimate taxes. Generally, you must pay estimate taxes if you are expecting to pay about $1000 of tax after all the deductions and tax credits.
- Do you have to pay estimate taxes? Well, that various depending on your tax status. You can find the conditions on whether or not you must paying estimate taxes easily on the IRS website.