Should i pay estimated taxes

The self-employed. Independent contractors, freelancers and people with side gigs are prime candidates for estimated quarterly taxes, says Bess Kane, a CPA in San Mateo, California. Landlords and investors maybe. People with rental income and investments might need to pay estimated quarterly taxes, too — even if their employers withhold taxes from their paychecks.

For , here's when estimated quarterly tax payments are due:. If you earned income during this period. You can make payments more often if you like, Kane says. And if we're talking bigger numbers, it gets pretty extreme. This may work best for people whose income is pretty much the same throughout the year, or for people who have a good idea of what their income is going to be.

This is often better for people whose income varies. Essentially, you annualize your tax at the end of each quarter based on a reasonable estimate of your income and deductions so far this year. The IRS has a worksheet to help you do the math. IRS Publication has all the rules and details, and good tax software will help you fill out the form and do the math.

If it turns out that you overestimated or underestimated your earnings, you can complete another Form ES and refigure your estimated tax for the next quarter. If you paid too much, you can get a refund or apply the overage to future payments.

Plus, there are special rules for farmers, fishermen and certain household employers. What are the filing dates for federal quarterly estimated tax payments? How do I make federal quarterly estimated payments? The IRS provides various methods for making quarterly estimated tax payments: You may credit an overpayment on your tax return to your estimated tax; You may mail your payment with payment voucher, Form ES ; You may pay by phone or online refer to Form ES instructions ; You may pay via electronic funds withdrawal with your e-filed return.

What if I do not pay enough federal income tax in a timely manner for the calendar year ? You will need to use IRS Form to show that your estimated tax payment is due because of income during a specific time of the year.

If not, the IRS assumes that you had the income throughout the year and simply underpaid your estimated tax. This could lead to a penalty. To hold your payments to a minimum, base each installment on what you have to pay to avoid the penalty, using any exceptions that benefit you.

If you have a tax refund coming from the IRS, you can elect on your return to have part or all of the money applied to your estimated tax bill for the following year. Although the IRS doesn't pay any interest on such advance payments, it may make sense to use the refund to pay the first installment typically due April 15 and perhaps even the second just to save yourself the hassle of writing and sending in the checks.

Also note: If at least two-thirds of your gross income is from farming or fishing, you have only one estimated tax payment for the year, which is due by January 15 of the following year.

You can even skip making the single estimated tax payment as long as you file your tax return by March 1 and pay any tax due in full. If all your regular income comes in salary and your employer is withholding enough taxes on your pay, you should not need to pay any estimated taxes unless you suddenly strike it rich by selling stock at a large profit or winning the lottery.

If you start a side business and you report your income from that business on Schedule C while continuing to work for an employer who withholds from your paycheck, you may be able to increase your withholding so that it equals what your tax liability would be for the entire year, or is enough to meet the exception for last year's tax liability that we told you about earlier.

In that case, you will not need to pay estimated taxes on your side business. Some retirees avoid the need to make estimated payments by having enough tax withheld from required distributions from IRAs at year-end to cover their tax bill for the year. You can even have federal income tax withheld from your Social Security income if you are receiving benefits.

We can't think of any good reason. Ignoring the rules might save you some time during the year, but you'll pay the piper come tax day. TurboTax Self-Employed uncovers industry-specific deductions. Some you may not even be aware of. Find more tax deductions so you can keep more of the money you earn with TurboTax Self-Employed. How to Estimate Federal Withholding. Make Withholding Changes Work for You. Estimate your tax refund and where you stand Get started.

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