IRS Form 1040ES, Estimated Tax for Individuals, provides all you’ll need to pay estimated taxes. This includes instructions, worksheets, schedules and payment vouchers. Another good source for information is IRS Publication 505, Tax Withholding and Estimated Tax
You may need to pay estimated taxes during the year depending on what you do for a living and what type of income you receive. If for example you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, etc. then you may have to pay estimated tax. Estimated tax is a method used to pay tax on income that is not subject to withholding.
For individuals I advise that taxpayers pay estimated taxes in 2011 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2011 taxes or 100% of the tax on your 2010 return. There are special rules for farmers, fishermen, certain household employers and certain higher income taxpayers. For Sole Proprietors, Partners and S Corporation shareholders, it’s best form to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your annual tax return.
To estimate tax due, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040ES, Estimated Tax for Individuals for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes. Due dates, for estimated tax purposes generally are April 15, June 15, Sept. 15 and Jan. 15 and you are expected to pay tax in the period when the revenue is recognized.