Estimated tax payments for 2011 can be used to figure out what you should pay for 2012. It’s a matter of predicting how much you will make in 2012 so you can estimate how much you should pay the IRS each quarter for your taxes.
Remember: estimated tax payments are for sole proprietors, S corporation shareholders, partners and self employed people. Since you won’t be getting a regular paycheck from an employer who takes automatically withholds taxes for you, you must do it yourself. The estimated tax payments are made four times per year.
Figuring your estimated tax payments is a bit like doing your actual taxes. You have to use your expected income, your taxable income, deductions, credits and exemptions…just like doing taxes but four times a year! If you think there is any change in circumstances like earnings going up or down you will have to figure it all out again for the next quarter and make the necessary changes.
There is a worksheet published by the IRS called the Form 1040-ES. It will show you what to pay based on what you expect to earn and multiplied by a percentage that will give you your 2012 estimated tax payments based on your estimated tax payments for 2011.