This form is used to calculate and pay your estimated tax, which is also commonly referred to as quarterly tax. You pay this on income that is not subject to withholding, including income from self-employment, interest, dividends, rents, and alimony.
Breaking down the boxes:
1. Estimated Tax Worksheet: Estimation of the amount of income you expect to receive for the year. You'll also take into account deductions, credits, and taxes you've already paid.
- Line 1: Expected adjusted gross income (that's total income minus certain adjustments) for the year.
- Line 2: Expected deductions, like the standard deduction or itemized deductions.
- Line 3-5: Simple subtraction and addition operations to adjust income.
- Line 6-8: Involves figuring out your tax using the tax rate schedules.
- Line 9-14: Credits, self-employment tax, and other taxes.
- Line 15-16a: Helps figure out if you owe any estimated tax, and how much.
2. Record of Estimated Tax Payments: The amounts you pay each quarter, and the dates you pay them. This can help you track your payments and make sure you're paying enough throughout the year.
3. Payment Vouchers (1-4): These are slips that you'll detach and send in with your payment if you're paying by check or money order. Each voucher corresponds to one of the four due dates for estimated tax payments. You'll fill in your name, address, Social Security number, and the amount you're paying.
Remember, the key to Form 1040-ES is estimation. The numbers you're working with are your best guess for what the year will look like, financially. This is why it's crucial to review and potentially adjust your estimated tax payments throughout the year as your income or deductions change.