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Are you required to Pay Estimated Taxes?

Maybe.

The general rule is: Taxpayers should pay as they go, so they won’t owe. There are two ways taxpayers can pay taxes. They can use either of these or a combination of the two:

• An employer can withhold tax from a person’s pay throughout the year and send it to the IRS.
• An individual can make estimated tax payments to the IRS.

IT APPLIES TO:

Individuals, including sole proprietors, partners and S corporation shareholders, may need to make estimated tax payments if:

• they expect to owe at least $1,000 when they file their tax return.
• they owed tax in the prior year.

Taxpayers who may need to make estimated payments include someone who:

• receives income that isn’t from an employer, such as interest, dividends, alimony, capital gains, prizes and awards.
• has tax withheld from their salary or pension but it’s not enough.
• has more than one job but doesn’t have each employer withhold taxes.
• is self-employed.
• is a representative of a direct-sales or in-home-sales company.
• participates in sharing economy activities where they are not working as employees.

How to avoid paying to little?

Wage-earners and salaried employees can avoid estimated tax payments through withholdings on their wages. They can use Form W-4 to tell their employer how much tax to withhold from their pay. Anyone can change their withholding any time during the year.

Source IRS.gov