Estimated Taxes

Estimated taxes are periodic payments made to the government on income that isn't subject to withholding, such as self-employment income, rental income, or dividends. Instead of waiting until the tax return is filed, individuals and businesses estimate their tax liability for the year and pay a portion of that amount quarterly. This helps avoid penalties for underpayment while ensuring the government has a steady flow of revenue throughout the year. If you pay too much, you may receive a refund when you file your annual tax return; if you pay too little, you might owe more.