When Do I Have To Pay Quarterly Taxes – Estimated taxes are payments to the government that some people must make four times a year. They are mainly relevant for freelancers and people with unemployment income.
Employees usually have taxes withheld (or “withheld”) from any wages they receive. This helps ensure the government gets the money it’s owed and helps employees get a smoother, more reliable stream of income (paying taxes gradually over time).
When Do I Have To Pay Quarterly Taxes
Unemployed workers, on the other hand, have to make those payments themselves since there is no one to withhold the taxes. Without estimated taxes, freelancers and other non-employees would face a hefty tax bill each April. Estimated taxes make their obligations more manageable and also help people pay into the system as they go.
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Self-employed people and corporations usually owe estimated taxes, but you may owe for other reasons as well. Here’s who’s likely to be on the hook:
A good rule of thumb is that you want to make sure you’ve paid at least 90% of your total tax for the year (either through withholding or estimated payments) before you file your annual tax return. If your unemployment income puts you at risk of falling below that 90% mark, then you probably need to file estimated taxes. Otherwise, you may face penalties.
Accurately estimating your quarterly taxes helps you avoid a big bill when it comes time to file, plus possible late fees and penalties.
An easy way to figure out your quarterly taxes is to go by what you earned and owed last year. If you expect your income to be about the same, you can look at what you paid last year and then divide it into four quarters.
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But if your income is changing or you want to be more accurate (to avoid overpaying or underpaying), here’s how to figure out how much you owe:
You can avoid penalties if you pay at least 90% of the current year’s taxes before you file your tax return, but it’s still a good idea to be as accurate as possible. After all, no one likes a tax bill.
However, your state’s deadlines may differ from the federal schedule. To be safe, make sure you’re always on top of both sets of deadlines.
Doing four extra tax filings a year might not be your idea of a good time. But if you owe estimated taxes, there are some steps you can take to ease the pain:
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If you’re self-employed, you probably owe estimated taxes. It’s important to calculate your estimated taxes accurately and pay them on time, because penalties, fees and interest on late payments can add up quickly.
Assessing taxes is like splitting a check. It requires difficult calculations, but it is much better than being stuck with a large bill. — Napkin Finance Please note that we are not tax professionals and this is not tax advice, just general guidance.
Federal income tax is a withholding tax, meaning you pay taxes as you earn or receive income throughout the year. Depending on your financial situation, you can pay these taxes through withholding or by making estimated quarterly tax payments.
So how do you know whether you should make quarterly payments or stick to traditional annual fees? This will largely depend on the type of work you do and how you are paid for that work.
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The Internal Revenue Service (IRS) determines how much each household owes each year by weighing gross income for the calendar year and adjusting it for certain exemptions, credits and deductions.
Most wage and salary earners prepay their tax liability throughout the year by withholding a portion of their income from their earnings. The final amount owed is then settled when they file their annual income tax return, which usually occurs in April of the following tax year.
Every financial situation is different, so you may need to adjust this withholding amount to best suit your needs. You can do this at any time by filing a new IRS W-4 form with your employer. This will help ensure that you are not hit with a large tax balance at the end of the year due to an underpayment, nor do you sacrifice a smaller salary throughout the year due to an overpayment.
If you don’t pay your income taxes through withholding, you may have to make quarterly estimated tax payments instead.
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Some individuals, including sole proprietors, partners and S-corporation shareholders, may need to make estimated quarterly tax payments to cover their tax liability for the year and avoid an underpayment penalty.
If you don’t pay enough tax throughout the year, you may have to pay an underpayment penalty. This can become especially complicated if you receive income from both regular wages and untaxed income.
For example, if you don’t factor your untaxed income into your paycheck withholding, you could be hit with an estimated tax penalty without even realizing you’ve been making estimated payments all along.
While these calculations may seem simple, you’ll need to consider your expected adjusted gross income, taxable income, taxes, deductions and credits for the year to determine what you’ll owe. Because taxes can get complicated quite quickly, you may benefit from seeking help from a tax professional.
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If you overstate or understate your tax liability, use IRS Form 1040-ES to refigure your tax liability and adjust your next quarterly payment. You want to make sure you’re estimating your income as accurately as possible to avoid any penalties.
Quarterly payments are made four times a year – in April, June and September of the current year and January of the following year. You can also choose to make smaller payments more often if it’s more financially feasible. For example, if your tax liability is $12,000 for the tax year, you can choose to make monthly payments of $1,000 throughout the year instead of four larger payments of $3,000 at once.
The IRS makes it convenient to make these quarterly payments online or by phone at no cost using the Electronic Federal Tax Payment System (EFTPS). You can also make payments through your checking or savings account with DirectPay or choose to pay cash through an IRS retail partner.
It is very important to stay on top of your taxes to avoid unnecessary penalties and unmanageable tax payments at the end of each tax year. Always consult a tax professional if you have any questions or concerns, and keep accurate financial records of income to make filing taxes easier. We look forward to all kinds of days throughout the year – birthdays, Christmas, the first day of spring, National Pancake Day. But there are some days we prefer to skip. We’re looking at you, Tax Day.
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The irony about Tax Day is that we don’t actually “pay” our taxes on April 15th every year. In fact, by Tax Day, most American workers have had enough money withheld from their paychecks all year to cover their taxes. When you file a tax return, you’re simply telling the IRS that you overpaid or underpaid your taxes.
Liability to pay the IRS directly. And if you earn above a certain amount, that means you’ll have to pay quarterly or estimated 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 very 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 a big tax bill. Have you ever seen a quarterback look to pass and then get crushed by a lineman? This is what a surprise tax bill looks like.
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If you owe less than $1,000, you can simply pay your taxes on that income when you file your tax return at the end of the year.
It doesn’t take long to rack up a $1,000 tax bill, 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 at work to offset the taxes earned on your hustle.
If you’re not sure whether you’ll have to pay quarterly taxes, you should contact a tax professional who can help you figure out which camp you fall into. If you end up owing a significant amount of taxes and don’t pay each quarter, you may have to pay an underpayment penalty on the taxes you owe. So don’t overlook this!
If you’re one of the many Americans who must file quarterly, circle these deadlines on your calendar or set reminders on your phone so you don’t forget to pay on time! If you’re late on a payment, you’ll be hit with interest and late payment penalties each month that can be up to 25% of your unpaid taxes.2 Quarterly deadlines are April 15, June 15, September 15, and January 15, unless those days fall on a weekend or holiday.3 Here are the 2023 quarterly deadlines:
Tax Dates & Deadlines Calendar [infographic]
Alright, time to dust off your calculator and crunch some numbers! Here is a step by step process for it
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