Taxes can be tricky. For many U.S. citizens, determining the amount of taxes they owe is a kind of guessing game, estimating withholdings through the employer. However, not all income is subject to the withholdings process. For these cases, Form 1040ES allows tax payers to estimate their tax liability on income that has not had tax payments withheld by the employer. Some examples of income that is not subject to tax withholdings are:
- -self-employment income
- money earned through investment interest
- money earned through stock dividends
- rent received as a landlord
- alimony payments
Furthermore, this form may apply to you if you have not designated withholdings through your employer. Designating your withholdings through your employer is referred to as electing voluntary withholdings. If you do not elect your withholdings, Form 1040ES is necessary for determining your tax liability and for reporting those taxes. To prevent confusion, it is suggested that those who do not elect withholdings pay their taxes throughout the year. Again, Form 1040ES is helpful for determining tax payments along the way. But remember that these taxes are estimated and may need to be adjusted at the end of the year.