If you are self-employed, part of a sole proprietorship or corporation, you may be required to submit estimated tax payments to the federal government. Plan on also paying tax estimates if income from investments or from the sale of property are significant from any given year.

Although you can use last year's data as a guide, you'll need to adjust for changes in your business status and also changes in law in figuring out your estimated tax payments.

To help you make sense of it, consider the following information on prepayment of taxes:

1. For those who are self-employed, sole proprietors or part of an S corporation, if you expect to owe tax of $1,000 or more, you generally must pay estimated tax payments.

2. Corporations must only comply with estimated tax payment requirements if they expect to owe $500 or more on their annual return.

3. Estimated payments for tax incur on Jan. 15, April 15, June 15 and Sept. 15. Those are firm deadlines and you can be fined for not paying by the due date.

Action Steps
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Seek advice on tax prepayment from an experienced professional

Since each situation is different and consequences are serious, it may be best to consult with an expert on your tax obligation. A certified public accountant or someone who specializes in taxes can inform you of whether you meet the criteria required for estimated tax payments.

I recommend: Discuss your unique situation with a professional from PriceKubecka, a certified public accounting firm. Butler Consulting Group offers tax services including tax planning and compliance.

Calculate your tax estimated payments

How do you know how much to pay? It's not just a guessing game. Use your previous year's history of income and earnings to help estimate the current year's tax burden. Utilize financial calculators and charts to help you determine how much of a tax pre-payment to send in.

I recommend: The State of California provides a chart on how much you should pay by percentage at certain deadlines throughout the year. Utilize the financial calculator from CCH to come up with an estimated tax payment.

Once you've got a figure, find out how to pre-pay taxes

There are several ways you can pay your estimated tax: by sending a check or money order with a payment voucher, paying electronically through the IRS, authorizing an electronic withdrawal through your bank, or by using a credit card via the Internet or by telephone. Also, an overpayment on the past year's return can be applied to the current year.

I recommend: Use the Internal Revenue Service's Electronic Federal Tax Payment System. Through Tax Form Processing, download Form 1040A.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  The IRS divides each year into four payment periods with payments due on specific dates within those periods. When figuring estimated payments for tax, aim high. If you don't pay enough in each of the pay periods, you can be assessed a penalty even if you show a refund at the end of the year.

Now that you're the boss, one of your biggest jobs is getting your business' tax payments to Uncle Sam – in full and on time. Sometimes, that means filing five times a year instead of just in April. Those four extra filings are estimated tax payments, required because our tax system operates on a pay-as-you-earn basis.

Estimated taxes are just what the name indicates. You estimate what your company's income will be and then send taxes on that amount to the IRS. Generally, you have to file these payments in equal installments. But some businesses, especially those that make the bulk of their income in particular quarters, might benefit from paying precisely what they owe each quarter instead of equalizing the estimated payments in four installments.

To make sure you meet your estimated tax requirements, you need to

1. Understand the estimated tax requirements
2. File the right forms
3. Determine how to pay

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Know the rules

Estimated taxes are due on specific dates. If you don't make a profit, you don't owe estimated taxes. As with all tax matters, details count.

I recommend: Estimated tax basics are laid out at the Internal Revenue Service's Web page on the topic for small businesses and the self-employed. Want something written a little more comprehensibly? Check out TurboTax's estimated taxes FAQ or Yahoo Small Business' article on paying them. Each of these sites, however, discusses estimated taxes as they apply to sole proprietorships. Requirements for more formalized businesses (C and subchapter S corps) are a bit different. If that's your situation, see IRS Publication 542, Corporations for filing details.

Business structure matters

When and how you pay your estimated taxes depends on your business structure. The timing, paperwork and even the threshold amount used to determine whether you need to file them at all differs if you're a sole proprietor or partnership rather than a corporation.

I recommend: Individuals and sole proprietors file Form 1040-ES, sending the IRS one voucher and payment each April 15, June 15, Sept. 15 and Jan. 15 (or the next business day when those dates fall on a weekend or holiday). Corporate estimated taxes also are due four times a year, but since some companies operate on fiscal rather than calendar years, the IRS requires the payments via Form 1120-W on the 15th of the fourth, sixth, ninth and twelfth month of the business' tax year. If you use computer software, such as TurboTax for Business, these added forms are included.

Pay up

Increasingly, the IRS is encouraging, and sometimes forcing, businesses to do business with the agency electronically. That applies to filing tax forms as well as paying what's owed.

I recommend: The software program you use will help you e-file forms. For basics on e-filing options for business and self-employed taxpayers, check out the IRS Web pages for small business and self-employed taxpayers, as well as the one for large and mid-sized corporations. The agency doesn't yet accept 1120-Ws electronically, but does take 1040-ES payments. If you use the agency's Electronic Federal Tax Payment System (EFTPS) to send in your estimated payment, you don't even have to file a form, just pay. For more on business tax e-payments, check out the EFTPS FAQ.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Run your company's income figures periodically throughout the year so you won't be surprised by a big tax bill.
• •  Complete the estimated tax worksheet you'll find in Form 1040-ES to get an idea of whether you'll face a possible underpayment penalty.
• •  If your company's income is relatively steady throughout the year, file using the regular estimated tax method, where you figure your overall estimated tax amount and pay it in four equal installments.
• •  Does your business encounter a sharp rise in income during a particular quarter? Then examine whether it's worthwhile to file using the annualized income installment method, where you pay estimated taxes based on the actual income for the applicable quarter.
• •  If you're a sole proprietor with a salaried job in addition to your business, you can increase your withholding amounts at your wage-paying job to cover any business underpayments.
• •  Withholding adjustments also work if your spouse has a job where payroll taxes are collected and you file a joint return. He or she can file a new W-4 to have more taxes withheld to cover your business liabilities.

It's critical for all individuals and businesses to have a thorough understanding of estimated tax payments laws and regulations. All sole proprietors, partners, members of a limited liability company and S corporation shareholders are responsible for paying and reporting estimated taxes on their income. It’s important to note that if you’re obligated to make federal estimated tax payments, you may also be required to pay state estimated tax.

The general rule for estimated tax payments is that you are required to pay your taxes as you earn income. If you haven’t paid enough taxes by tax filing time, you may be assessed a penalty for underpayment. To help you learn more about estimated tax payments laws and regulations, you should:

1. Determine if you’re required to make estimated tax payments.

2. Learn about deadlines for estimated tax payments.

3. Obtain information on how to make estimated tax payments.

Action Steps
The best contacts and resources to help you get it done

Research guidelines on estimated tax payments

Whether or not you'll need to make estimated tax payments depends upon the amount of taxes you expect to owe after deducting any federal income tax withholding amounts. It's important to note that estimated tax payments were previously required to be a minimum of 100 percent of your tax liability for the previous year to avoid tax penalties. However as a result of the American Recovery and Reinvestment Act of 2009, you may be safe by only paying 90 percent of your previous year tax liability if your income is primarily derived from a small business.

I recommend: Visit Turbo Tax to read more about the criteria used in determining if you will be responsible for making estimated tax payments. Read more about the American Recovery and Reinvestment Act of 2009 guidelines on estimated tax payments by checking out the National Small Business Association.

Obtain information on due dates for estimated tax payments

Estimated tax payments are made quarterly. For individuals, the payments must be received by April 15, June 15, September 15 and January 15. Estimated tax payments for corporations are due on different dates depending on how they set their tax year. For tax years ending on December 31, the dates are April 15, June 15, September 15 and December 15 and for tax years ending on June 30, the dates are October 15, December 15, March 15 and June 15.

I recommend: For the definitive word on estimated taxes, see the Internal Revenue Services Publication 505 for individuals and Publication 542 for corporations. Learn more about estimated tax payments by visiting H&R Block.

Make estimated tax payments via phone, Internet or mail

The U.S. Department of Treasury allows businesses and individuals to make estimated tax payments conveniently via the Electronic Federal Tax Payment System (EFTPS). The system is free and allows users to make tax payments via the Internet or phone any time of the day. Businesses and individuals can schedule payments weekly, monthly or quarterly and also make payments in advance using EFTPS. When mailing estimated tax payments, you'll need to use Tax Form 1040-ES.

I recommend: Learn more about making estimated tax payments via phone or Internet by visiting EFTPS. Read more about mailing estimated tax payments by checking out Fairmark.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you receive a significant amount of investment income during one tax year, you may not be required to make estimated tax payments even though you owe taxes for that particular year. To learn more about this and other exceptions for making estimated tax payments, you may consider consulting with a tax professional.