Withholding and Estimated Tax

Withholding and estimated tax terms explain how taxpayers prepay income tax during the year instead of waiting until the return is filed. This section is especially useful when a refund or balance due seems surprising.

If the payment result on the return feels confusing, start with Withholding, then Estimated Tax, then Underpayment Penalty.

Start Here

• Withholding
• Federal Income Tax Withholding
• Backup Withholding
• Estimated Tax
• Underpayment Penalty

What This Section Covers

• How employee withholding works through payroll.
• How nonwage payments can also involve withholding when reporting problems exist.
• When people outside standard wage withholding often need estimated tax payments.
• Why timing matters even before the final return is filed.

Best Reading Paths

• Start with Withholding if the reader first needs the umbrella concept before separating payroll withholding, backup withholding, and estimated tax.
• Start with Federal Income Tax Withholding if the issue is paycheck withholding through payroll.
• Start with Backup Withholding if the issue is nonwage payments, a missing or incorrect TIN, or a request for Form W-9.
• Start with Estimated Tax if the taxpayer is paying directly during the year rather than having tax withheld by a payer.
• Move from Estimated Tax to Form 1040-ES, then Underpayment Penalty, if the issue is self-employment, gig income, investment income, or another low-withholding situation.

Related Sections

• Tax Forms and Filing
• Payroll Tax
• Penalties and Compliance

In this section

• Backup Withholding
  Backup withholding is federal income tax withheld from certain nonwage payments when TIN or certification problems affect reporting.
• Estimated Tax
  Estimated tax is tax paid directly during the year in periodic installments when withholding alone is not expected to cover enough tax.
• Federal Income Tax Withholding
  Federal income tax withholding is the portion of tax withheld from paychecks or other payments and sent toward the taxpayer's federal income tax bill.
• Underpayment Penalty
  The underpayment penalty is a penalty that can apply when a taxpayer does not prepay enough tax during the year through withholding, estimated payments, or both.
• Withholding
  Withholding is the tax collected during the year from income payments, most commonly from wages through payroll.