1997 Tax Help Archives  

Estimated Tax

This is archived information that pertains only to the 1997 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

The federal tax system is based on a pay-as-you-go plan. This means the tax is paid as income is earned or received. Tax is generally withheld from your wages or salary before you get it, and may also be withheld from other types of income such as pensions and unemployment compensation if requested. However, tax is generally not withheld from income such as alimony, interest, dividends, rental income, self-employment income, and capital gains. You may be required to pay estimated tax on these types of income. Estimated tax is the method of paying tax on income not subject to withholding and on other income from which not enough tax is withheld. You do not have to make estimated tax payments if you expect your 1998 tax return will show a refund, or a balance due to IRS of less than $500.

Generally, you should make estimated tax payments for 1998 if you expect to owe tax of $500 or more, after withholding and credits, and you estimate that the total amount of tax withheld and your credits will be less than the smaller of:

  1. 90% of the tax to be shown on your 1998 tax return, or
  2. 100% of the tax shown on your 1996 tax return, if your 1997 tax return covered all 12 months of the year and your adjusted gross income is $150,000 or less or $75,000 or less if you are married filing a separate return.

Get Form 1040ES to help you figure your estimated tax liability for 1998.

Your first estimated tax payment for 1998 is due April 15th. You may pay the entire year's estimated tax at that time, or you may pay your estimated tax in four payments.

The four payments are due April 15th, June 15th, September 15,1998, and January 15, 1999. You may have to pay a penalty if you do not pay enough tax through withholding or estimated tax payments, or if you fail to make required estimated tax payments by the due dates. Estimated tax payments can be used to pay federal income tax, self-employment tax, and household employment tax. Topic 306 provides additional information on the estimated tax penalty.

Estimated tax requirements are different for farmers and fishermen. Publication 505 provides more information about these special estimated tax rules and about estimated tax in general.

You can order Publication 505, Tax Withholding and Estimated Tax, by calling 1-800-829-3676.

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