Freelancers: should you be paying estimated taxes?

Estimated taxes are on income that has not already had taxes automatically deducted.

• If you’re someone else’s employee and get regular checks, you’ll see on your checkstub that your employer has already done the work of paying taxes for you – calculated them and remitted them to the IRS.
• If you’re self-employed, you receive a check for a lump sum that has not had any taxes taken out.  You are responsible for paying those taxes, and if you think you will owe $1000 or more, you have to make estimated payments every quarter.

How I do estimate my taxes?

• You will need your tax return from last year, as well as any estimated payments you have made so far.
• If you want to calculate this yourself, fill out the Estimated Tax Worksheet on page 7 of Form 1040-ES. You can download a copy from the IRS here.
• I highly recommend using Turbo Tax’s Home/Business software to calculate for you – as you will see, the Estimated Tax Worksheet is a killer.

When are estimated taxes due?

• January 17 = Covers 4th quarter (Sep 1-Dec 31) of  the previous year.
• April 18 = Covers 1st quarter (Jan 1 – March 31) of the current year
• June 15 = Covers 2nd quarter (April 1 – June 30) of the current year
• September 15 = Covers 3rd quarter (June 1 – August 31) of the current year

How do I pay?

• ONLINE: Sign up and send your payment through eftps.gov
• VIA MAIL: Fill out Form 1040-ES and send in the appropriate Payment Voucher (they’re numbered and dated) with your payment to the IRS branch assigned to your state (check out page 4 of Form 1040-ES for addresses)
• PHONE: Make a payment via credit card using the EFTPS Voice Response System by calling 1.800.555.3453
• We’ve also come across a site called Easy Estimated Taxes that allows you to send e-payments and will even send you reminders when it’s time to pay. They also have a pretty helpful FAQs section if you want more information after reading our blog.

Get in touch for a free consultation.