Do I have to make "Estimated Tax" payments?

Revised for Tax Year 2007 (Calendar Year January 1, 2007 to December 31, 2007)

For personal income tax purposes, estimated tax payments can be used to pay Federal income tax, self-employment tax, and household employment tax. To estimate if you need to pay tax on income not subject to withholding or on other income from which not enough tax is withheld, you need to calculate if the total tax you'll owe on your annual income tax return will be covered by the amount of tax you have already had either:

• withheld from wages and other payments, or

• paid in earlier estimated payments for the year, or

• credited to your account from adjustments or overpayments of previously filed returns.

Generally, you should make estimated tax payments if you will owe tax of $1,000 or more, after withholding and credits, and the total amount of tax withheld and your credits will be less than the SMALLER of:

• 90% of the tax to be shown on your 2007 income tax return, OR

• 100% of the tax shown on your 2006 income tax return, if your 2006 tax return covered all 12 months of the year. However, if your year 2006 adjusted gross income exceeded $150,000 ($75,000 if you file a separate return from your spouse), then you must pay 110% instead of 100% of last year's tax.

NOTE: Estimated tax payment requirements are different for farmers and fishermen.

Due Dates

Your first estimated tax payment is usually due on April 17, 2007. You may pay the entire year's estimated tax at that time, or you may pay your estimated tax in four payments. The four payment due date for tax year 2007 are:

• April 17, 2007

• June 15, 2007

• September 17, 2007

• January 15, 2008

Normally, payments are due on the 15th day of the month. However, if the due date for making a tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next business day.

What is the minimum amount of estimated tax that I am required to pay without incurring any penalty or interest charges?

In general, you may owe a penalty for tax year 2007 if the total of your withholding and estimated tax payments does NOT equal at least the SMALLER of:

• 90% of your 2007 tax (current year tax), or

• 100% of your 2006 tax (prior year tax). (Your 2006 tax return must cover a 12-month period.) Your 2006 tax, for this purpose, is your total tax for 2006. There are special rules for farmers and fishermen, and for certain higher income taxpayers.

Generally, you do NOT have to pay an underpayment penalty if either of the following conditions apply:

• Your total tax is less than $1,000 (less withholding and credits), OR

• You had NO tax liability in tax year 2006.

Can I make an "estimated tax" payment by credit card?

Yes, click here for detailed information.

Click here to return to "Frequently Asked Tax Questions"