There is a special rule in the tax law that excuses you from filing fourth quarter estimated taxes if you file your annual tax return (Form 1040, etc.), and pay any tax due by January 31. If you are a fiscal year taxpayer, you don't have to make the last quarter estimated tax payment if you file your income tax return by the last day of the first month after the end of your fiscal year and pay all the tax you owe with your return.

Stella, a self-employed individual with no tax withheld, does not make an estimated tax payment for the fourth quarter of 2011 but files a Form 1040 and pays the tax due as shown on the return on January 20, 2012. Although she did not make a fourth quarter payment of tax, she is excused from doing so because she filed her return on or before January 31, 2012, and paid the full estimated tax amount due. Otherwise, she would have had to make a fourth quarter estimated tax payment by January 17, 2012.

A special rule applies if you are a farmer or fisherman. You can avoid the fourth quarter estimated tax payment if you file your annual return (Form 1040, etc.), and make your payment of tax due by March 1.

You may be asking, "why file early?" One advantage of filing early is that you have a 16-day (from January 15 to January 31) interest-free loan from the IRS.

However, there are pitfalls to filing early:

• It's difficult to be accurate on your final tax return when you might not have received all the Form 1099 information returns and other information you need to fill in the forms.
• If you have computed your estimated tax payments based on a figure of less than 100 percent of the final tax amount shown on the tax return (i.e., the lesser of 90 percent of the final amount shown on the return or 100 percent of the tax shown on the preceding year's return) you will have to come up with the balance by January 31, rather than having the luxury of waiting until April 15

However, filing early isn't always possible due to factors beyond your control. You may not have received documents that must be attached to your final tax return (Form W-2 for example). Or, if you are a partner or S corporation shareholder, you may not have received Schedule K-1s, containing important tax information needed to complete your annual return. Finally, as a self-employed individual, you simply may not have had sufficient time to compile the tax information needed to complete your Schedule C, which must be included with your annual return when you file.