Calculate Federal Estimated Taxes

Generally, you should make estimated tax payments if you are:

• Self-employed;
• Expect to receive significant income from non-wage sources such as rental income, stock sales, interest, dividends, alimony, etc.;
• Expect to lose a large deduction or credit.  For example, if you deducted mortgage interest in the past but you recently paid off your mortgage, you no longer get to take this deduction.

You can use TurboTax to determine whether you need to pay estimated tax. If you do, TurboTax will figure the payments and even print the vouchers for you.

The United States tax system is a "pay-as-you-go" system, which means that tax is supposed to be paid on income earned or received throughout the year. That's why employers withhold income tax from each paycheck.

However, if you receive income outside of employment, there is no employer to take care of the withholding. That means it's up to you to make estimated tax payments on that income if you want to avoid possible underpayment penalties.

Underpayment penalties are assessed if you don't withhold or pay enough tax on income received during the quarter. In fact, it's entirely possible to get hit with an underpayment penalty if the IRS owes you a refund (or if you pay your entire tax bill) when you file your return!

• When are estimated tax payments due?
• Using TurboTax to calculate and prepare estimated tax payments

In TurboTax, these due dates as well as the IRS mailing address are included in the Filing Instructions document, which prints out with your federal return.

TurboTax will tell you whether you need to pay quarterly estimated tax and will figure the payments for you.

1. In TurboTax, click the Federal Taxes tab and then click Other Tax Situations in the bar below the tab.
2. Under the Other Tax Forms heading, click Start or Revisit to the right of Form W-4 and Estimated Taxes.
3. Click No on the next screen, Adjust How Much Tax You Pay.
4. On the Estimated Taxes for 2010 screen, click Prepare Now.

   Note: If the screen title is Review Your Estimates, click Review Now instead.

5. Follow the on-screen instructions.

If you choose to print your estimated tax vouchers (Form 1040-ES), they will print as part of your federal return. The IRS mailing address and due dates for the payments will be in the Payments You Need To Make section of the Filing Instructions document, which also prints with your return.