J.K. Lasser's Your Income Tax 2015: For Preparing Your 2014 Tax Return

Chapter 27Estimated Tax Payments

Income taxes are collected on a pay-as-you-go basis through withholding on wages and pensions, as well as quarterly estimated tax payments on other income. Where all or most of your income is from wages, pensions, and annuities, you will generally not have to pay estimated tax, because your estimated tax liability has been satisfied by withholding. But do not assume you are not required to pay simply because taxes have been withheld from your wages. Always check your estimated tax liability. Withholding may not cover your tax; the withholding tax rate may be below your actual tax rate when considering other income such as interest, dividends, business income, and capital gains.

Your withholdings and estimated tax payments must also cover any liability for self-employment tax, alternative minimum tax (AMT), the additional 0.9% Medicare tax on earnings, the additional 3.8% Medicare tax on net investment income, and FICA withholding tax for household employees.

If you expect your 2015 tax liability to be $1,000 or more after taking into account withheld taxes and refundable credits, you should make quarterly estimated tax payments unless you expect the withholdings and credits to be at least 90% of your 2015 total tax, or, if less, 100% or 110% of your total tax for 2014. The 100% test applies if your 2014 adjusted gross income (AGI) was $150,000 or less, $75,000 or less if for 2015 you will file as married filing separately. The 110% test applies ...