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May 18, 2015
The Indiana income tax system is basically a “pay-as-you-go” system. Taxes are automatically taken out of our paychecks. However, if you have income from non-wage sources, such as from dividends, interest, farm income, or rental income, no taxes are withheld. The “pay-as-you-go” requirement still applies.
If you have income not subject to withholding tax, or if you don’t have enough tax withheld from your income, you will need to make estimated tax payments if you wind up owing more than $1,000 to the state when you file your taxes.
Instead of paying taxes throughout the year, estimated payments are made in equal installments due in April, June, September, and January (of the next year.) For someone who estimates owing $1,224 in tax, he will make four estimated tax payments of $306 each. This will pay the tax he owes as the year progresses.
What do you need to pay?
To figure your estimated tax, you are tasked with estimating how much income you are going to make during the year and then figuring how much tax is due on that amount.
If you receive steady payments each month, such as taxable pension income, you have a good idea how much income you’ll make for the entire year. For example, if you receive $3,000 a month, you’ll get $36,000 for the year ($3,000 each month X 12 months in a year). Multiply $36,000 by the current state tax rate (.033 for 2015) to find you owe $1,188.
Another example is farm income. It can be challenging to estimate your income when you don’t start seeing those checks come in until the crops and livestock are sold or the rental income comes in. For many, this occurs at the end of the year and trying to make an educated guess ahead of time can be difficult.
How can you estimate your income when you have no clue how your business will do? Maybe you’ve recently retired and don’t know how your tax picture will look.
For these answers and more, check back in a few days for “Estimated Taxes Part Two: How much estimated tax do you need to pay?”
May 13, 2015
If you’re looking for a career in state government, the Indiana Department of Revenue might be the right place for you.
You may be asking yourself, “Why should I apply for a job with the department?”
The department has a lot to offer its employees, including generous leave time, top-of-the-line health benefits, great retirement options, and room to grow within the agency.
Could you be one of the 750 DOR employees who work to serve Indiana taxpayers and properly administer tax laws?
The department is headquartered in downtown Indianapolis but has locations throughout Indiana. The department conducts operations through ten internal divisions. From enforcement to taxpayer advocacy, each DOR employee is essential to ensuring Indiana taxpayers have the easiest, most efficient tax experience possible. Go to www.in.gov/dor/5128.htm to view department job openings.