Do You Have To Make Estimated Tax Payments?
Updated for 2022
Most of us only deal with good ol’ April 15th when it comes to taxes. But if you’re self-employed or have income beyond a salary, quarterly estimated tax payments might apply to you. So how do you know if you have to make estimated tax payments? Let’s get into that now!
Do You Have To Make Estimated Tax Payments? You Might If:
-You’re self-employed and need to make self-employment tax payments
-You have income other than a salary (like interest dividends or early retirement withdrawals)
-Your income includes a wage income (i.e you get a W2 annually) and had a tax liability the prior year
-You sold investments that had a profit
-You received disability or unemployment income
If any of the above apply to you, and you expect to owe taxes of $1000 or more ($500 for corporations), it’s a good time to start planning for quarterly tax installments.
So what does this really mean, and what action do you need to take to get your quarterly tax situation in order (and avoid extra tax hassles and headaches at the end of the year)?
The Top 3 Questions I Get About Estimated Taxes
1. How do I know how much estimated tax to pay (or, what does “estimated” entail)?
If you’re working with a CPA, he or she may have vouchers for you that have a dollar amount already in them. So roll with what your CPA has prepared for you.
BUT, if this is your first year in business (or your first profitable year), you likely don’t have that kind of precedent yet. So what do you do?
The IRS breaks it down on the 1040 ES worksheet, which you can find right HERE. If your business is a corporation, form you’ll want is called 1120-W, which can be found HERE.
The above forms can be confusing, I like to use their handy-dandy Tax Withholding Estimator which can be found HERE.
2. How do I make the actual estimated tax payment itself?
Check out this link for the estimated tax forms . Scroll down to page 11 for the actual form, print it out, and mail it along with your check.
If you’re an online kind of person, find the link to pay right here.
You will have to file estimated taxes on the federal level (IRS) and check to see your city/local/state level as well. You typically have the option to pay online.
3.What happens if I miss a payment? Are there penalties?
If you don’t pay enough taxes through withholding and by making estimated tax payments, you may be charged a penalty. There might also be penalties if your estimated tax payments are late, even if you’re due a refund on your end-of-the-year tax return.
(It’s pretty much the IRS saying “hey, you made a lot of money and you didn’t pay us, so here’s a fee for making us wait for our money.”)
The 2023 Estimated Tax Deadlines are:
Q1 — April 18, 2023, paying estimated taxes on income earned from Jan-March 31st
Q2 — June 15, 2023, paying estimated taxes on income earned from April-June 30th
Q3 — September 15, 2023, paying estimated taxes on income earned from July-Sept 30th
Q4 — January 15, 2024, paying estimated taxes on income earned from Oct-Dec 31st
So there you have it! The basics on estimated tax payments, and what actions to take to ensure smooth sailing throughout the tax year.
What questions do you have about Estimated Taxes? Leave them in the comments below!
Until Next Time,
Love, Light, and MONEY, Honey…
Kaylee