I’m self-employed. How do I find out if I’m required to make estimated tax payments? We receive this question every year. Typically, most employees have their federal taxes withheld by their employer, but in many cases, individuals may be independent contractors, have supplemental income, or have a side hustle or two. Should you be paying estimated tax payments?
According to the IRS (Internal Revenue Service), taxpayers and “Individuals, including sole proprietors, partners, and S corporation shareholders, generally, have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.”
Surprising, even Corporations are generally required to make estimated tax payments if they expect to owe tax of $500 or more when they file their income taxes. But as we all know; our income and expenses seem to change year over year.
Some taxpayers can relate figuring out how they need to pay their taxes to pulling down the handle of a slot machine.
“Maybe this year, I’ll pay during tax season!”
“Maybe I’m required to pay throughout the year.”
Can you hear the slot machines?! How do you know if you should be making estimated tax payments? Lucky for you there’s a way to find out, so you can avoid paying tax penalties when you file your tax returns.
Do Estimated Tax Payments Apply To You?
The IRS has provided an option to help taxpayers figure out if they should pay towards their taxes throughout the year. The IRS has created an Estimated Tax Payments calculator. This tool will help you determine if you’re required to make estimated tax payments for the current tax year or if you meet one of the exceptions to making payments.
Wouldn’t it be a relief to know you’re required to pay estimated tax payments on your income ahead of time and avoid late payment penalties?
Keep in mind, this is REQUIRED for some taxpayers! If you receive wages, salaries, or income that’s not already subject to taxes being withheld by your employer, you may be required to pay estimated taxes throughout the year – before your annual tax payments are due.
Use the IRS Estimated Tax Payment Calculator to find out if paying estimated taxes applies to you.
If you have questions about tax planning or setting up estimated tax payments, contact our office. Our Tax Consultants would be happy to meet with you to help you set up your estimated tax payments for this year or provide you with a tax projection for next year.