DEFINITION of 'Estimated Tax'. Estimated tax is a periodic advance payment of taxes based on the amount of income that is earned and the amount of estimated tax liability that will be incurred as a result.How do you calculate estimated tax payments?
You have a number of options when it comes to calculating what you owe each quarter: Use Form 1040-ES – You can calculate your quarterly estimated tax payment using Form 1040-ES (the same form used to pay estimated taxes), which includes a worksheet that helps you estimate how much you owe for the current year.How do I make estimated tax payments?
To make your estimated quarterly tax payments by mail, tear off the voucher at the bottom of Form 1040-ES and mail it to the IRS. Include a check or money order for your payment. You don’t have to include the worksheet with your calculations. To be considered on time, the form must be postmarked by the due date.What is federal estimated tax payments?
Estimated tax is a method of paying tax on income that is not subject to withholding tax. This can include income from self-employment, business earnings, interest, rent, dividends and other sources. The IRS requires estimated tax to be paid quarterly, typically in 4 equal installments.