Calculating Estimated Taxes

When e-filing your tax extension, eventually you’re going to come across the Tentative Tax & Payment section where it asks about your estimated taxes. You’re probably scratching your head like, “What in the world… estimated taxes?” Exactly. And much like the World, with careful navigation, you can make your way through figuring out your estimated taxes just like how the early settlers figured out their way through uncharted lands, or something similar to that. Exciting, right?

Information You’ll Need:
Like any good explorer, you have to be prepared; there’s no reason to just wander around needlessly. According to the IRS, you have the following resources available to you:

• Estimated Tax Worksheet for the current year
• Instructions for Estimated Tax Worksheet for the current year
• Tax Rate Schedules for the current year
• Prior tax year return and instructions

These items will serve as your handy-dandy map to figuring out your income, deductions, and credits.

Where To Start:
Generally, the best way to begin is to fill out your tax return until you’ve gotten to where you have missing information. The information missing could be your reason for e-filing an extension in the first place, remember?

You’ll want to make an educated guess on what your missing information will report. This may prove to be choppy waters in your exploration, but make use of your prior tax return if you’re expecting a similar amount of taxes due.

No Man’s Land:
If you have no prior tax return to serve as a reference point, or you just can’t find it, you may be in even more troubling waters. No worries, that’s why pro explorers, such as yourself, carry compasses. And, in this case, that compass is the IRS-Provided Calculator, which can help give you an accurate estimate.

Whether you use your handy-dandy map or compass, you’re going to add together all your sources of income, subtract any itemized or standard deductions you know of, and reduce per person the exemption amounts.

If you owe, or are very close to paying the IRS, it may be best to overestimate rather than to guess short and suffer any penalties or interest. Any over-payment is refunded back to you after your return is finalized, such a fitting end to your prosperous, exploration journey!