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Why Do We Have to Pay Estimated Taxes?

Our federal and state taxation is based on a pay as you go system. Your employer withholds taxes from you paycheck and sends those dollars directly to the IRS and your state government. If you are self employed, or if you have other forms of income that are not pre-taxed, you are responsible for paying your taxes ahead by making quarterly estimated payments to the government. Generally, there are three scenarios in which you do not need to make any estimated tax payments. 1. You expect to owe less than $1,000 in taxes for the tax year after subtracting your federal income tax withholding from the total amount of tax you expect to owe this year. 2. You expect your federal withholding taxes (p