Quarterly Individual Estimated Tax Payments Explained

Dealing with estimated tax payments is something that many people have to be concerned with. This is most commonly used by those that have self-employment income. Here are the basics of quarterly individual estimated tax payments and how to work with them effectively.

Quarterly Tax Payments

If you have any self-employment income, you will need to make quarterly tax payments to the IRS. Most employees are not familiar with this process because their employer takes out the proper tax withholding out of their paycheck. With this system, you will be responsible for withholding the proper amount of money from each paycheck and sending it to the IRS yourself. Payments are required once every quarter according to the payment schedule.

Determining How Much To Withhold

Perhaps the most difficult part of this process is determining how much money you should withhold. If your income fluctuates from one month to the next, you may not know exactly how much to take out. However, you can usually get a good idea by basing it on the previous year's tax return. Look at the total amount of money that you paid for your taxes. Divide that amount by the amount of money that you made. This will give you a percentage to work with. If you are making approximately the same amount of money as you made last year, you will need to withhold that percentage from each paycheck. As a self-employed person, you will also need to account for the self-employment tax. This works out to 15.3% of your income.

Paying Taxes Quarterly

After you successfully withhold the proper amount of money, you need to make sure that you send it into the IRS on time. There are four deadlines that you need to be aware of throughout the year. You will need to make your first payment by April 15. Your second payment will be due on June 15, the third payment on September 15, and the last payment by January 15 of the following year. You can simply write a check to the United States Treasury and mail it to your local IRS processing center. Make sure that you also send form 1040-ES with your payment so that the IRS knows what you are sending. You might also want to write your Social Security number on the check.

Estimated Federal Tax Payment System

Another strategy that you could utilize will involve making a monthly payment to the federal government. By using the Estimated Federal Tax Payment System you will be able to electronically make payments to the IRS. This will allow you to make quarterly payments online or you can set up an automatic monthly transaction. By doing this, it will make the payment process much easier as you will be working with a smaller, regular payment. Many people find it difficult to save the necessary amount of money for four months at a time. In order to do this, simply visit the Estimated Federal Tax Payment System website and set up an account.

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