Sunday, May 22, 2011

Self Employed Individuals May Need to Make Quarterly Tax Payments to the IRS

Estimated tax payments exist because our tax system is “pay as you go”. In other words, the government wants you to pay income tax as you earn money. If you work for someone and receive wages reported on Form W-2, you may not need to make estimated tax payments. Your employer probably withholds enough money from your paycheck to satisfy your annual tax obligation. However, if  you receive income in which taxes were not withheld, you may have to make estimated tax payments. A few examples are when your income is reported on Form 1099-Misc, you received rental income, or you sold stock or property at a gain.  If you are self-employed and are paid with cash, checks, credit cards, etc. throughout the year, you probably need to be making estimated tax payments too. 
 
You must pay estimated taxes if both (1) & (2) apply:

1. You expect to owe at least $1,000 in tax for 2013, after subtracting your withholding and refundable credits.

2. You expect your withholding and refundable credits to be less than the smaller of:
  •  90% of the tax to be shown on your 2013 tax return   OR
  • 100% of the tax shown on your 2012 tax return
If you have to pay estimated taxes, you can use the EFTPS system to expedite your payments. Or, you can mail in your check using IRS Form 1040-ES.


Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas

Enrolled Agent; Investment Advisor Representative

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