ESTIMATED TAX
Federal and state tax laws require a quarterly pay-
ment of estimated taxes due from corporations,
trusts, estates, non-wage employees, and wage
employees with income not subject to withholding.
Individuals must remit at least 100 percent of their
prior year tax liability or 90 percent of their cur-
rent year tax liability in order to avoid an under-
payment penalty. Corporations must pay at least
90 percent of their current year tax liability in
order to avoid an underpayment penalty. Addi-
tional taxes due, if any, are paid on taxpayer’s
annual tax return.
Typically, non-wage earners pay estimated
tax since their incomes are not subject to with-
holding tax to the same extent as the income of
a salaried worker. Persons who receive a certain
level of additional income, apart from their
salaries, must also pay estimated tax.
The calculation and payment of estimated
tax are preliminary stages to the filing of a final
INCOME TAX return. Under federal and most
state laws, estimated tax is paid in quarterly
installments. The tax paid is applied to the tax
owed when the taxpayer files a final return. Any
overpayment of estimated tax will be refunded
after the filing of the final return. If no tax is
owed, a taxpayer is still required under federal
law, and many state laws, to file a final return.
When tax is due upon the filing of the final
return, the taxpayer must pay the outstanding
amount. Depending upon the amount due and
the reasons for the miscalculation, a taxpayer
might be liable under federal and state law for
interest imposed upon the deficiency, as well as
