Do I need to make estimated tax payments?
Everybody loves this answer: it depends! The U.S. requires that you pay taxes on income as you receive it. This is why employers withhold for Social Security, Medicare, and Federal taxes from each paycheck (state taxes also if applicable for your state).
However, if you receive income from sources other than regular employment pay, you may have to make estimated tax payments to comply with the U.S. "pay-as-you-go" requirements. This is because you have no "employer" withholding for you.
Some instances where you may have to make estimated tax payments include the following:
1. You're self-employed
2. You receive significant income from non-wage sources such as alimony and investments (rental properties, stocks sales, interest/dividends, retirement account withdrawals, etc.)
Federal estimated payments are due on a quarterly basis. You may be liable for underpayment penalties and interest if you fail to make these estimated tax payments during the year. Contact us if you would like help preparing your estimated tax payments.