Southeast Louisiana Legal Services
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Low Income Taxpayer Clinic
(504) 529-1000 ext. 225
What is Estimated Tax?
The federal tax system is a pay-as-you-go system. This means that you either need to pay your taxes throughout the year by: 1) having them withheld from your paychecks or by 2) making quarterly estimated tax payments (4 payments throughout the year). Estimated tax payments are advance tax payments made quarterly on the taxes people estimate that they will owe when they file their income tax return. You must make estimated tax payments on any income from self-employment, interest, dividends, alimony, and rents because they do not have taxes automatically withheld from them.Type of Income: / How to Pay Your Taxes On It:
Wages earned through being an employee / Have taxes automatically withheld each pay period by filling out a Form W-4
Self-employment earnings / Make estimated tax payments each quarter
Other Income: interest, dividends, rents, alimony, awards, gambling winnings, etc. / Make estimated tax payments each quarter
How Do I Know If I Need to Pay Estimated Tax?
You will need to pay estimated tax if BOTH of the following apply to you:
1.You expect to owe at least $1,000 in tax for 2010 after subtracting your withholding and refundable credits.
2.You expect your withholding and refundable credits to be less than the smaller of:
a. 90%* of the tax to be shown on your 2010 tax return, or;
b. 100% of the tax shown on your 2009 return (if your 2009 return covers all 12 months)
*Farmers and Fishermen use 66 2/3% instead of 90%
Note you may want to use your 2009 tax return as a guide to find your 2010 estimated tax. However, you should check for 2010 changes at www.irs.gov in Publication 505.
How to Figure your Estimated Tax
You will need:
●The 2010 Estimated Tax Worksheet
●The Instructions for the 2010 Estimated Tax Worksheet
●The 2010 Tax Rate Schedules
●Your 2009 Tax Return (if possible)
How to Pay Your Estimated Tax
Many people (farmers and fishermen see exceptions below) can pay their estimated tax by April 15th, 2011 OR in four equal amounts throughout the year.
If you do a 4-time payment schedule, the dates are as follows:
●First Payment: April 15th, 2010
●Second Payment: June 15th, 2010
●Third Payment: September 15th, 2010
●Fourth Payment: January 18th, 2011
Farmers and Fishermen: If at least 2/3rds of your gross income is from farming or fishing for 2009 or 2010, you can do one of the following:
1.Pay all of your estimated tax by January 18th, 2011.
2.File your Form 1040 by March 1st, 2011, and pay the total tax due. In this case, 2010 estimated tax payments are not required to avoid a penalty.
What happens to me if I don’t pay my Estimated Tax?
If you do not pay your estimated tax throughout the year, you will be subject to interest on the taxes you owe and penalties for late payment. This means the amount of money you end up paying the IRS will be more than if you had paid your estimated tax throughout the year.
What if I need help filing my taxes?
The IRS has a program called the Volunteer Income Tax Assistance Program (“VITA”). VITA offers free tax help to low and moderate-income (generally, $49,000 and below) people who cannot prepare their own tax returns. The sites are usually open January to October, and are located at community and neighborhood centers, libraries, schools, shopping malls, and other convenient locations. To find a VITA site near you, call the IRS at 1-800-906-9887.
Louisiana Low-Income Taxpayer Clinic
Call (504) 529-1000 ext. 225
(if long distance, call toll-free at 877-521-6242)
For Vietnamese: (504) 529-1000 ext. 4
For Spanish: (504) 529-1000 ext. 239
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This is not legal advice. This document has been prepared for general information purposes only. Legal advice depends on the specific circumstances of each situation. Also, the law may vary from state to state, so that some information may not be correct for your state.