Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes earnings from self-employment, interest, dividends, rents, and alimony.
As a result, sole proprietors, partners, S corporation shareholders, and independent contractors may need to pay quarterly installments of estimated tax unless they owe less than $1,000 when they file their tax return. Employees generally do not need to make estimated tax payments because employers withhold income taxes from the employees' paychecks.
Because the U.S. tax system operates on a pay-as-you-go basis, taxpayers are required to pay most of their tax liability during the year. A penalty will apply to any taxpayer that pays too little tax (generally less than 90 percent of the tax shown on the return for the current tax year or 100 percent of the tax shown on the return for the preceding tax year) through withholding, estimated tax payments or a combination of the two.
For tax-year 2018, the remaining estimated tax payment due dates are Sept. 17, 2018 and Jan. 15, 2019.
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