Estimated Tax Payments are required advanced payments of current tax liability based either on wage withholdings or installment payments of a taxpayer’s estimated tax liability. To avoid penalties, a taxpayer generally must pay to the IRS either 90% of their final tax liability, or either 100% or 110% of their prior year’s tax liability, depending on their adjusted gross income. Estimated payments should be made on income from self-employment, interest, dividends, alimony, rental income, gains from the sale of assets, and prizes and awards. Estimated payments can also be made if a taxpayer’s withholding will not cover the total amount of tax due at the end of the tax year.
If a taxpayer makes estimated payments, it should be reported on their individual tax return along with any taxes that were withheld from their sources of income. Taxpayers who do not make required estimated tax payments, or do not have enough taxes withheld from their income, could be subject to penalties, even if they are due a refund on their tax return.
Taxpayers filing as a sole proprietor, self-employed individual, partner, or S corporation shareholder are required to pay estimated taxes if they expect to owe taxes of $1000 or more when they file their tax return. If a taxpayer had a tax liability in the previous tax year, they may be required to make estimated tax payments for the current tax year.
Calculating estimated payments for the upcoming year
You can use the Estimates Calculator to project how much your client should pay quarterly toward their federal taxes.
To access the Estimates Calculator, from the Main Menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Generate 20xx Estimates
- Estimates Calculator
NOTE: xx or 20xx – represents the following tax year, i.e. 20 or 2020
Creating and printing Federal estimated tax payment vouchers for the upcoming year
Estimated tax payment vouchers to be used with payments that will be made by check can be generated. To generate the vouchers in Keystone Tax Solutions Pro, from the Main Menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Generate 20xx Estimates (1040-ES)
- Enter the amount to be paid in each quarter
- Click the View icon in the toolbar at the top of the window
- The coupons should open in your PDF viewer. To print them, select File, then Print.
NOTE: Estimates vouchers can also be printed from the View Results menu.
Setting up estimated tax payments by direct debit
Estimated tax payments can be scheduled with the IRS to be made by direct debit. To schedule these payments, from the Main Menu of the tax return (Form 1040) select:
- Payments, Estimates & EIC
- Generate 20xx Estimates (1040-ES)
- Enter the amount to be paid in each quarter
- Schedule 20xx Estimated Payments for E-File
- YES to the question confirming you would like to do this
- Enter the 9-digit routing number (RTN), account number, and indicate whether the account is a checking account or savings account.
- Confirm the information is correct; edit as needed.
- Exit
NOTE: The IRS will not confirm that the estimated tax direct debit arrangement has been set up, nor provide advance notice to the taxpayer prior to debiting their account.
Creating and printing state estimated tax payment vouchers for the upcoming year
To print State Estimated Payments in Keystone Tax Solutions Pro, from the Main Menu of the tax return (Form 1040) select:
- State Return
- Select the state you would like to print the estimated vouchers for
Because the state forms and menus vary, you may need to use the Form Finderfrom within the state return to help locate the State Estimated Payment Vouchers. From the Main Menu of the state return select:
- The Form Findericon at the top the screen
- Estimates from the list of forms and descriptions
- Print Estimate Coupons
- Select Yes to print the Estimated Vouchers
NOTE: If you are having difficulty locating the State Estimates Menu in any of the state programs, please contact Technical Support.
This is a guide on entering Estimated Payments into the Keystone Tax Solutions Pro program. This is not intended as tax advice.
Additional Information:
Instructions for Form 1040-ES, Estimated Tax for Individuals