What is an “estimated tax payment” and how do I know if I have to make a payment?
If you have income that is not subject to federal or state income tax withholding at the time you receive it (for example, non-qualified scholarships, stipends, University-paid student health premiums, and fellowship payments), you may be required to make quarterly estimated income tax payments to the IRS and State of Illinois. These are payments of the estimated income tax you owe on these sources of income, paid quarterly in advance of the date you file your personal income tax return.
Federal: You can make these determinations by completing the IRS 1040-ES form. In general, if you are a domestic student or foreign resident alien for tax purposes and estimate that you will owe more than $1,000 in federal tax, you will need to make an estimated payment. Foreign nonresident aliens already have a federal withholding of 14% and should not be required to submit a federal estimated tax payment.
Illinois State: You can make these determinations by completing the Illinois IL-1040-ES form. In general, if you are a domestic or foreign student and estimate that you will owe more than $500 in Illinois state income tax, you need to make an estimated payment.
Are we required to pay quarterly estimated tax payments?
You are required by federal and/or Illinois state regulations to pay if you will have a liability of over $1000 (Federal) or $500 (Illinois state) when filing your tax return. If your annual liability is below these thresholds, you may elect to pay liabilities at the time of tax filing.
I failed to submit estimated quarterly tax payments during a calendar year to the IRS and Illinois State Revenue Office for my living stipend payments, what form(s) should be filled out to pay the tax on this stipend income now?
You will need to report this income when filing your annual tax return and pay any liabilities at that time. If your liability is more than $1000 (Federal) and/or $500 (Illinois state), you will be subject to penalties and interest. It is recommended that when submitting your tax return, you request that any penalty or interest be waived by submitting a memo.