A lot of people work as an employee and their employee withholds taxes from their paycheck, and sends it off to the irs for them its kind of a pay as you go type of deal. I m sure you have noticed a nice chunk of your income gone from your paycheck. If you have correctly filled out your w4 form when you began your job you get a nice refund come time to file your taxes.
If you are a contractor or self employed and you have no taxes taken out. Which means you haven’t paid any taxes for the year, you are more then likely going to owe taxes unless of course you have been doing some estimated taxes to the irs.
If you are self-employed and expect to owe $1,000 or more when you file your annual return, then you must pay estimated taxes on income. If it’s not through withholding, then it has to be done by quarterly estimated taxes. If your business is structured as a corporation, you’ll need to pay estimated taxes if you expect to owe $500 when you file
You may owe estimated taxes if you receive income that isn’t subject to withholding, such as the following :
- Interest income
- Gains from sales of stock or other assets
- Earnings from a business
Estimated taxes are the responsibility solely of the person receiving the untaxed money. Form 1040-ES will helps you calculate your estimated taxes and provides vouchers to send along with your estimated tax amounts if you would like to pay by check.
The U.S. tax system works on a pay-taxes-as-you-earn basis as said before so the Treasury’s goal is to get any estimated taxes regularly, too. The IRS has set up a timetable calling for estimated tax payments four times a year. Although the payments are commonly called quarterly, they don’t necessarily coincide with calendar quarters.
The four estimated tax payments are generally due each year on the 15th of April, June, September and January. But if that date falls on a weekend or on some federal holiday, the 1040-ES filing deadline is pushed to the following business day.
The IRS would rather for you figure the total amount of taxes you are going to owe for the year , divide it by four and send in equal payments according to the schedule. There’s a work sheet with the Form 1040-ES package or when filing your taxes the person should be able to print you the amounts from the tax software.You can send a paper check along with the Form 1040-ES voucher. Alternatively, you can file electronically with a credit card with whom ever you did taxes with or you can go on the irs website and sign with there direct pay option. Here are a few ways to know what you are going to have to pay as well as the estimated filing schedule.
- Use Form 1040-ES – You can calculate your quarterly estimated tax payment using Form 1040-ES (the same form used to pay estimated taxes), which includes a worksheet that helps you estimate how much you owe for the current year. Corporations should use Form 1120-W to calculate estimated taxes.
- Refer to Last Year’s Return – If you have been in business for a while, you can refer to your previous year’s federal tax return. Include all the income and deductions you expect to take on your current year’s tax return and refer to the total tax you paid so that your estimated tax payments are in the same range as last year’s taxes (100-110 percent is the range to shoot for to avoid underpayment problems).
- Make a Quarterly Calculation – If you are a freelancer or independent contractor and face fluctuating or cyclical income, you might prefer to calculate your estimated taxes on a quarterly basis.
|Estimated tax due||For income received|
|April 15||Jan. 1 through March 31|
|June 15||April 1 through May 31|
|Sept. 15||June 1 through Aug. 31|
|Jan. 15||Sept. 1 through Dec. 31|