If you have retired and no longer have a paycheck for Uncle Sam to dip into to collect his share, you might be on the hook for estimated tax. By Rachel L. Sheedy, Editor May 21, 2010 EDITOR'S NOTE: This article was originally published in the May 2010 issue of Kiplinger's Retirement Report. To subscribe, click here.Think you're done with taxes now that April 15 has passed? Not necessarily. It's time to start considering your 2010 tax bill and whether you need to make estimated payments to the IRS. In fact, you might already be late. The first estimated payment was due April 15. You may have to make estimated payments if you're retired -- or will call it quits this year -- and there's no longer a paycheck for Uncle Sam to dip into to collect his share of your earnings. If you're collecting a paycheck, estimated tax may be due on investments and self-employment. To figure out where you stand, you must project your tax bill for the year. You can use last year's return as a guide if you expect your income this year to be about the same. Otherwise, use the IRS's worksheet for Form 1040-ES; find it in Publication 505. Advertisement Add up all your taxable sources of income, including pensions and distributions from investment accounts. Also account for any taxable events occurring this year, such as a sale of real estate. Keep an eye out for tax-law changes. "You may be entitled to a new deduction or credit," says Mildred Carter, a senior federal tax analyst for CCH, a tax-information publisher. If you have investment income, make sure you take the lower long-term capital-gains tax into account, says Bob Scharin, senior tax analyst at the tax and accounting business of Thomson Reuters. The top rate is 15%, and taxpayers in the 10% or 15% brackets qualify for a 0% capital-gains tax rate in 2010. You will need to make estimated payments if your calculations show that you will owe more than $1,000 in tax beyond the amount of your withholding. Coming up short triggers a penalty that is calculated for each of four payment periods. Payments for 2010 are due on April 15, June 15, September 15 and January 18, 2011. (The final payment is usually January 15, but that date falls on a weekend followed by a holiday in 2011.) If your payment is late or too small, the IRS will apply the penalty interest rate, which is currently an annual rate of 4%, to each day your tax shortfall went unpaid. Say you miss the first two due dates and triple your payment on September 15. You will pay a penalty based on the number of days you were late in making the first two payments. Advertisement Your estimate need not be exact. If your payments cover 90% of this year's tax, you won't pay a penalty. If you figure you will owe $10,000 and you pay $9,000 divided into four equal payments, you'll be okay. Ways Around Estimated Tax There are ways to avoid a penalty. One option is if withholding and on-time estimated payments total 100% of last year's tax. You can pay at least 25% by each due date. If your previous year's adjusted gross income was more than $150,000, you'll need to pay 110%, or 27.5% by each due date. Even if your income jumps at the end of the year, you'll avoid a penalty. If you discover toward the end of the year that you have paid too little in estimated taxes, you can increase withholding to cover the shortfall. Some retirees have enough withheld from the required minimum distribution from a retirement plan to cover their estimated tax bill for the year. Even if the payment is withheld in December, it counts as if it were paid evenly throughout the year. Those still working can have an extra amount withheld from their last paychecks of the year. Advertisement Looking forward, you can have tax withheld from pension payments, Social Security benefits, retirement-account distributions or annuity payments. For a pension or annuity, file a Form W-4P. You can request to have tax withheld from Social Security or other government benefits by filing Form W-4V. New retirees should not automatically base estimated payments on 100% of last year's tax, says Terry Jones, a certified public accountant in Falls Church, Va. Doing so could easily cause you to overpay. "If you worked all last year, that tax liability might be higher than this year's," she says. For more authoritative guidance on retirement investing, slashing taxes and getting the best health care, click here for a FREE sample issue of Kiplinger's Retirement Report.