Gather documentation related to all sources of your income. These may include interest paid by banks on checking and savings accounts, earnings from your non-retirement investment accounts, stock dividends, capital gains and income from employment.
Use Form 1040-ES to calculate estimated tax on your retirement pension income and other sources of income. You will need to pay estimated tax if you will owe over $1,000 in tax and your withholding is less than 90 percent of the taxes owed on your current year's return or 100 percent of the taxes you paid last year, whichever is smaller. Increase last year's percentage to 110 percent if your adjusted gross income that year was greater than $150,000, or $75,000 for married taxpayers who file separately.
Use the Estimated Tax Worksheet provided in Form 1040-ES to calculate your estimated taxable income based on your income from all sources, minus itemized or standard deductions and taxes previously withheld and paid. The worksheet is easy to use and provides clear instructions.
Calculate the tax on your retirement pension income for the current tax year using the 1040-ES Tax Rate Schedules. Add this number to line 6 on the worksheet and adjust for any credits to arrive at your total estimated tax figure.
Contact the IRS if you need assistance with calculating estimated tax. You can call the IRS toll-free at 800-829-1040 or stop by a Taxpayer Assistance Center. Call your local center to schedule an appointment and avoid having to wait in line. Check the IRS website for addresses, phone numbers and opening hours for TAC offices (see Resources).