What are Estimated Tax Payments & How Do You Make Them?
You might have to make quarterly estimated tax payments if you’re an independent contractor or freelancer? Read this article to learn about quarterly estimated taxes and how to make them.
When you’re an employee your employer withholds your income taxes for you from each paycheck. These taxes include income tax, Medicare, Social Security, etc. However, for those that are self-employed, it is their responsibility to pay calculate and pay their own income taxes, Medicare, and Social Security. Examples of people that are self employed are freelancers, independent contractors, often lawyers, accountants, and other types of professional services professions.
At this point, many people who are self employed might be asking,
How do I calculate my income tax payments if I’m self employed?
How much income tax do I have to pay?
When do I pay my income tax if I’m self employed?
What are estimated taxes?
Estimated taxes is a way to pay taxes on income that is not subjected to withholding. For example, individuals that are self-employed, taxes (such as income taxes) are not automatically withheld. In addition, for income that is earned from dividends, rents, and alimony, taxes are not automatically withheld. However, when you’re an employee working for a company, your taxes are automatically withheld from each paycheck. The employing company withholds and pays these taxes for you.
You’re likely required to pay estimated taxes if you’re self-employed. Estimated taxes are paid quarterly (four times year). The reason it is called estimated taxes is because you estimate how much income you’ll make for the year when you calculate your taxes for each estimated tax payment.
Do I have to make estimated tax payments?
You have to make estimated tax payments in situations where your income tax is not automatically withheld. These situations include:
- Self employed income
How much estimated tax do I need to pay?
To determine how much each estimated tax payment will be is simple. All that you need to do is determine what your estimated total taxes will be for the year, then divide that by four. You total income tax estimation should include self-employment tax (i.e. Social Security and Medicare tax), income tax and any other taxes.
How do you I pay estimated taxes?
To make estimated tax payments send in Form 1040-ES by mail. Or pay online by going to IRS.gov/payments. Or pay with a mobile app provided by the IRS; search on the app store for IRS2Go app. The last option is to pay by phone.
Form more information about estimated taxes and tax withholdings visit, About Publication 505, Tax Withholding and Estimated Tax.
When do I make estimated tax payments?
The 2020 estimated tax due date schedule for each of the four payments can be found in this article, 2020 Estimated Tax Due Dates.
About Falcon Expenses
Falcon Expenses is an iOS solution for expense tracking and management. Scan receipts, we type merchant, date and amount, auto-track mileage expenses via GPS and log billable hours with an integrated timer. Quickly organize expenses by time period, project or client and easily prepare reports for email to anyone in PDF or spreadsheet formats, all from your phone. Use for reimbursements, taxes, record keeping or invoicing. Falcon Expenses is great for professionals, freelancers, realtors, business travelers, truckers and more. Find out more, here.
Please check out the following articles for more information about Falcon Expenses features and services: