Income tax is a pay-as-you-go system. If you're an employee, you pay as you go through withholding. However, if you're self-employed, you must make quarterly estimated tax payments for the amount you expect to owe the IRS. These payments should satisfy both your income and self-employment taxes.

If you have other income, like W-2 wages, you might be to withhold enough to cover self-employment taxes. So, you might not need to make estimated payments. However, if you receive a substantial amount of taxable income not subject to withholding, you should make estimated payments.

You might make estimated payments for income that’s not tax-free and comes from:

• Stock sales
• Personal residence sale
• Interest
• Dividends

Estimated tax payments for 2013 are due:

• April 15, 2013
• June 15, 2013
• Sept. 15, 2013
• Jan. 15, 2014

You can make estimated tax payments using any of these methods:

• Apply your 2012 refund to your 2013 estimated tax.
• Mail a check or money order with Form 1040-ES: Estimated Tax for Individuals.
• Use the Electronic Federal Tax Payment System (EFTPS) to submit payments electronically. Visit www.eftps.gov or call 800-555-4477 or going to . You can make payments weekly, monthly, or quarterly. You can schedule payments up to 365 days in advance.
• See www.irs.gov for credit-card options. You might be charged a convenience fee for using your credit card.

To learn more, see IRS Form 1040-ES instructions.

You must make estimated tax payments and file Form 1040-ES if both of these apply:

• Your estimated tax due is $1,000 or more.
• The total amount of your tax withholding and refundable credits will be less than the smaller of:
  • 90% of your 2013 tax liability
  • 100% of your 2012 tax liability

Special rules exist for higher-income taxpayers. If your 2012 adjusted gross income (AGI) was more than $75,000 -- $150,000 if married filing jointly -- you must prepay 110% instead of 100% of the 2012 tax. You’ll need to do this to avoid a possible underpayment penalty for 2013.

Ex: Your 2012 tax liability was $3,800. At the beginning of 2013, you expect your 2013 tax to be $2,400, so you arrange to have a total of $2,200 withheld from your paycheck during the year. Then, in March, you sell some business assets, which gives you an additional $6,975 in income. This will increase your expected 2013 tax liability to $3,560.

You must pay 90% of the $3,560 you expect to owe for 2013, which is $3,204. Since you already arranged to have $2,200 withheld from your paycheck, you must make estimated payments totaling $1,004 ($3,204 - $2,200). Your options to avoid a penalty include:

• Make 4 estimated tax payments of $251 starting on April 15, 2013.
• Pay the entire amount of $1,004 on April 15, 2014.
• Increase your withholding for the rest of 2013 so that you withhold an additional $1,004, for total withholding of $3,204.

To learn more about the estimated tax penalty, see the Underpayment of Estimated Tax tax tip.