Determining how much tax to pay during the year relies on a reasonably anticipated adjusted gross income, along with the anticipated taxable income, tax liability, deductions, and credits for the end of the current year. It may be helpful to refer to the income tax return you filed the previous year for this information.
The IRS understands that anticipating income is essentially predicting the future, which is relatively difficult for most taxpayers. If your estimations prove to be inaccurate as the year progresses, recalculate your estimated taxes and inform the IRS of the updated calculations. Diligence in estimated tax payment calculations is critical to avoid costly penalties.
When calculating estimated tax payments, remember to carefully consider significant changes within your business, as well as any changes or updates in the current tax law.