FAQ on Estimated Tax Payments for the Self-Employed: Part I
As a successful self-employed professional, you’re required to make tax payments throughout the year. Not sure how this process works? In this two-part FAQ, we’ll clear up common sources of confusion.
How will I know if I owe quarterly taxes?
If you are currently self-employed, you most likely need to pay quarterly taxes. That being said, some self-employed taxpayers are exempt.
If you have a very small tax liability, you may be able to handle it all at once. This occurs in one of a few very specific situations:
- You have a W2 job for which taxes are withheld and, without self-employment income, you would almost certainly receive a sizable refund.
- You owe or expect to owe less than $1,000 for a given tax year.
If these situations don’t apply and you are currently self-employed, you almost certainly will need to pay estimated taxes. Still confused? Check out the qualification worksheet found with Form 1040-ES.
What is Form 1040-ES and what does it have to do with self-employed quarterly taxes?
Without an employer to withhold taxes, it takes extra initiative on your end. This means completing Form 1040-ES. This cannot be accurately submitted without information from the previous year’s tax return.
Those new to self-employment may need to estimate potential earnings. This can always be adjusted in a future Form 1040-ES if the original estimate is off.
How can quarterly taxes be paid to the IRS?
Once completed, Form 1040-ES provides blank vouchers, which can be used to mail payments to the IRS. The Electronic Federal Tax Payment System is also an option for paying quarterly taxes.
As a self-employed professional in need of targeted tax assistance, you can benefit from working with the experts at the Highland Tax Group. Reach out today to learn more about the many services we provide for self-employed clients.