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.