Estimated Taxes Definition

What is estimated tax?

Estimated taxes are paid quarterly (or more often) to the IRS on income that cannot be handled by withholding.

Extended Definition
When your business has income that cannot be taxed by using withholding, you are required to estimate your total annual federal tax and make quarterly estimated tax payments to the IRS. Examples of income include revenue from self-employment, rent, dividends, prizes, pensions, and more. Penalties can be imposed if your estimated tax payments plus any withholding are not enough to cover your tax obligations for the year.

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