Income that is not subject to withholding -- such as earnings from self-employment, interest, dividends, rents, alimony, etc. -- is still taxable income. In order to avoid an underpayment penalty, you must pay estimated tax if both of the following apply.
* You expect to owe at least $1,000 in tax for 2013, after subtracting your withholding and refundable credits, and
* You expect your withholding and refundable credits to be less than the smaller of:
a) 90 percent of the tax to be shown on your 2013 tax return, or
b) 100 percent of the taxes shown on your 2012 tax return.
Estimated tax payments for 2013 are due on April 15, June 17, Sept. 16 and Jan. 15. These dates differ from payroll taxes due dates and sometimes confuse taxpayers.
The Internal Revenue Service expects you to pay the estimated taxes in equal payments throughout the year. However, if you receive your income unevenly throughout the year (for example, you are a self-employed seasonal business or have a large capital gain late in the year), you may be able to lower or eliminate your required estimated tax payments by using the annualized income method.
Estimated tax payments can be made in several ways. You can pay online at www.irs.gov/Payments/Make-a-Payment. You can pay by phone with a direct transfer from your bank account or credit/debit card by calling 800-555-4477.
Utah residents may also mail payments to: Internal Revenue Service, P.O. Box 510000, San Francisco, CA 94151-5100.
If you mail your payment, you must include the Estimated Tax coupon. Be sure your name, address and Social Security number appear on the coupon, and put 2013 Form 1040ES and your Social Security number on the memo line.
Checks or money orders should be made out to the United States Treasury. Never send cash.
For more information or the mailing address for states other than Utah regarding Estimated Tax payments, visit www.irs.gov/pub/irs-pdf/f1040es.pdf.
IMPORTANT NOTICE: On Oct. 31, the IRS issued another scam alert:
"Victims are told they owe money to the IRS, and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver's license. In many cases, the caller becomes hostile and insulting.
"This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they can help protect themselves. Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer," says IRS Acting Commissioner Danny Werfel.
"If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don't pay immediately, that is a sign that it really isn't the IRS calling."
Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail.
Learn more about the phone scam at www.irs.gov/uac/Newsroom/IRS-Warns-of-Pervasive-Telephone-Scam.
Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at firstname.lastname@example.org.