How To Pay Quarterly Taxes – We look forward to many different days throughout the year – birthdays, Christmas, the first day of spring, Shrove Tuesday. But there are some days we’d rather skip. We’re looking at you, tax day.
The irony of Tax Day is that we don’t “pay” our taxes on April 15th every year. In fact, by Tax Day, most US workers had enough money withheld from their paychecks for the year to cover their taxes. When you file your tax return, you are simply telling the IRS that you have overpaid or underpaid taxes.
How To Pay Quarterly Taxes
Obligation to pay directly to the IRS. And if you earn more than a certain amount, that means you’ll have to pay quarterly or estimated taxes.
Taxes: Chapter 2 — How Do Freelancers Pay Taxes?
Quarterly taxes are estimated tax payments made to the IRS four times a year. But taxes are never as simple as they seem.
Your tax bill can add up pretty quickly, so you should set aside 25–30% of each paycheck for taxes if you’re self-employed. You don’t want to be blindsided by huge taxes. Have you ever seen a quarterback look to pass and then get busted by a lineman? That’s what a surprise tax bill feels like.
If you owe less than $1,000, you can simply pay taxes on that income when you file your tax return at the end of the year.
It doesn’t take long to rack up $1,000 in tax, so even a side hustle can complicate your tax situation. If you have a regular job and don’t want to mess around with quarterly payments, you can increase your withholding from your job to offset the taxes earned from your side hustle.
Paying Estimated Taxes: What You Need To Know
If you’re not sure whether you need to pay taxes quarterly, you should consult a tax professional to help you figure out which camp you fall into. If you owe a significant amount of taxes and don’t pay quarterly, you may have to pay a late payment penalty on top of the taxes you owe. So, don’t overlook it!
If you’re one of the many Americans who need to file quarterly, mark these deadlines on your calendar or set reminders on your phone so you don’t forget to pay on time! If you pay late, you will be charged monthly interest and late payment penalties, which can be as high as 25% of the unpaid taxes. 2. The quarterly deadlines are April 15, June 15, September 15, and January 15, if those days fall on weekends or holidays.3 Here are the quarterly deadlines for 2023:
Okay, time to dust off your calculator and crunch some numbers! Here’s a step-by-step process to help you figure out how much you’ll need to pay in estimated quarterly taxes. Remember, this is just an estimate. Your quarterly taxes will vary based on your income, tax year, filing status, and applicable deductions. And don’t get me started on state income taxes!
Let’s say you’re filing single and own a small business that you expect to generate $50,000 in self-employment income. After deducting your business expenses, your taxable income will be around $35,000.
Quarterly Taxes: You Asked, Wingspan Answered! — Freelancing Females
Using our example, your income is taxed at 12%. This means that your income up to $10,275 is taxed at 10%, and income between $10,275 and $41,775 is taxed at 12%. Assuming you take the standard deduction ($12,950), which reduces your taxable income to about $22,050, you would owe about $2,440 in income taxes.4
Income, so that means you owe another $5,355 for the year. Add your income tax and self-employment tax together, and you’ll have your estimated taxes for the year. In this case, your total estimated tax for the year is $7,795.
Since you owe more than $1,000 in taxes, the estimated annual tax is what you’re going to expect to pay quarterly taxes. All you have to do is divide this total into four quarterly payments that you will pay to the IRS every three months. In this case it would be $1,949.
Now that you’ve determined your quarterly tax, all you have to do is pay Uncle Sam! You can pay your quarterly taxes in several ways:
Why You Should Pay Attention To Quarterly Tax Payments
. You still need to file your tax return before tax day to show what you actually earned for the year. This is also the time when you can claim credits and deductions that lower your tax bill.
Second, if business is doing well and you see that your income will be higher or lower than you thought, you can always adjust your estimated taxes each quarter.
Still have questions about whether you need to pay your taxes to the IRS every quarter? Is your head spinning with the thought of estimated payments?
We know the right tax professionals to help you prepare your quarterly taxes with confidence. Whether you are a small business owner or an individual subscriber in need of guidance, our tax professionals can help. They are RamseyTrusted and will figure out your tax situation so you can get back to the work you love most.
Your Guide To Quarterly Self Employed Taxes
If your taxes are simple enough to do yourself and you need easy-to-use tax software that gives you peace of mind, look no further than Ramsey SmartTax! No hidden payments, no ads, no games. So it should be!
Since 1992, Ramsey Solutions has been committed to helping people regain control of their money, build wealth, develop their leadership skills and improve their lives through personal development. Millions of people have benefited from our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts with over 17 million weekly listeners. Learn more. If you are a freelancer, employee or self-employed, taxes are paid more than once a year. Depending on the amount of money you earn, you may be eligible for quarterly tax payments. They happen quarterly or four times a year, which means you’ll be facing the dreaded tax day more often.
But not everyone knows that these payments are expected of them. With so many dates to keep track of, you might forget to make a payment by the due date or even underestimate your payment.
Rest assured, we’ll cover everything you need to know about estimated quarterly tax payments, including penalties and how to manage them when you receive them.
Federal Income Tax Deadlines
This is a tax payment based on your income over a period of time. As a freelancer, gig worker or self-employed, your employer does not withhold taxes. So now you have to pay taxes on your income directly to the government in the form of estimated tax payments.
Any income that is not subject to withholding is eligible for estimated quarterly tax, including capital gains and dividends, rental income or earned income.
Generally, Social Security and Medicare taxes are automatically withheld from your paychecks when you work a W-2 job. Since this is not the case for self-employment, the IRS requires you to pay self-employment taxes. Self-employment taxes are 15.3%, 12.4% for Social Security and 2.9% for Medicare.
Therefore, it is a good idea to set aside a certain percentage of your monthly income for tax purposes.
You May Need To Make Estimated Tax Payments
Self-employed people pay estimated taxes, but not all self-employed people qualify. If you are self-employed and expect to owe at least $1,000 in taxes, you will be eligible to make quarterly tax payments.
Not sure if you qualify? You can use the Quarterly Tax Calculator to determine if you qualify.
The quarterly tax payment dates are April 15, June 15, September 15, and January 15 of the following year, unless this period falls on a weekend or holiday. Since deadlines occur four times a year, it can be helpful to set up payment reminders or mark the dates on your calendar.
You will need to add up the total liability for the current tax year. This includes personal income tax, self-employment tax and any other taxes you may owe. Then divide that number by four.
Tax Dates & Deadlines Calendar [infographic]
The IRS may impose a penalty if you miss the quarterly tax payment deadline. The penalty is 0.5% of the unpaid amount for each month or part of a month in which the tax is not paid. The amount you owe and the time you pay the fine affect the amount of the fine. Therefore, it is better to make the payment as soon as possible. You can use a tax penalty calculator to help figure out the amount of penalty you owe.
Even if you cannot afford the payment, it is better to pay part of the debt, as this will reduce the amount of the penalty.
If you don’t pay enough taxes, you may also be at risk for a penalty from the IRS. It is impossible to know the exact amount you owe. But the IRS offers a
You can avoid the underpayment penalty if you owe less than $1,000 after deductions for withholdings and credits. Also, if you paid 100% of the taxes on the previous year’s tax return or 90% of the tax withheld.
Don’t Miss This Quarterly Tax Payment Deadline
If you want to avoid it
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