The federal income tax is a pay-as-you-go tax. You must
pay taxes as you earn or receive income throughout the year.
There are two methods for paying taxes:
If you are an employee, your employer
probably withholds income tax from your paycheck.
Income received from pensions,
bonuses, commissions, gambling winnings, and other
sources may also have income tax withheld from the
amount you receive.
The amounts withheld are paid to
the IRS on your behalf.
Estimated Tax Payments
If you do not pay taxes through
withholding, or do not pay enough tax through withholding,
you may need to make estimated tax payments to make
up the deficit.
Generally, people who are in business
for themselves pay their taxes through estimated payments.
Tax on income received from dividends,
interest, rents, royalties, and capital gains is generally
paid through estimated payments.
If you do not have enough taxes withheld, or you do not
pay enough in estimated taxes, you may be subject to a penalty
for underpaying your taxes.
The Making Work Pay Credit, new for 2009 and 2010, will
automatically reduce withholding for most wage-earners.
If, when you prepare your return, you do not qualify for
as much credit as you received through reduced withholding,
your refund could be smaller or you may even owe tax. This
might especially affect those with two jobs, including families
where both spouses work. For this reason, you may want to
adjust your withholding by filing a new Form W-4 to account
for the difference.
The IRS Withholding Calculator can help you determine if
your withholding is appropriate for your income, dependents
and other tax information.
If your income is low enough that you will not have to
pay income tax, you may be exempt from income tax withholding.
You may still be subject to Social Security and Medicare
tax withholdings. You can claim an exemption from income
tax withholding only if:
- For the prior tax year you received a refund, or were
entitled to a refund, of all federal income tax withheld
because you had no tax liability.
- For the current tax year you expect to receive a refund
of all federal income tax withheld because you expect to
have no tax liability.
> Itemized Deductions
< Federal Withholding
> Standard Deductions
> Tax Credits
> Education Credits
> Refund Cycle Chart