Check Withholding Now to Avoid Surprises at Tax Time
The federal income tax is a pay-as-you-go system. Employers generally withhold tax from workers? wages. Taxpayers also often have taxes withheld from certain other income including pensions, bonuses, commissions and gambling winnings.
People who do not pay tax through withholding, like the self-employed, generally pay estimated tax. In addition, those who earn income such as dividends, interest, capital gains, rent and royalties are usually required to make estimated tax payments.