Most people enjoy the benefit of having their taxes automatically deducted from their paycheck by their employer. However, Moolanomy notes that if you’re a freelancer, small business owner or self-employed, you may be required to pay quarterly estimated taxes.
The idea of filing taxes four times a year may sound unappealing, but, as a guest post on Budgets Are Sexy by small-business site Outright.com points out, neglecting to file quarterly can lead to fees at tax time in April.
So how do you figure out how much you owe each quarter? First, remember that these are estimated taxes. In order to come up with this estimate, the post at Budgets Are Sexy suggests that you look at last year’s total tax return and divide that number by four to find what you owe each quarter.
Even if your untaxed income grew substantially over the past year, you won’t incur any penalties and fees from the IRS as long as you pay the same amount you paid last year, points out a guest post on Etsy by Outright.com. This is thanks to what is known as the safe harbor rule. They also note that you only need to pay quarterly estimated taxes if you will owe more than $1,000 at the end of the year, after subtracting your withholding and refundable credits.
When the time does come to file your estimated, quarterly taxes, use special form 1040-ES. When it comes to filing, the IRS provides the following deadlines for tax years beginning January 1.
| Tax Period | Due Date |
|---|---|
| Jan. 1 – March 31 | April 15 |
| April 1 – May 31 | June 15 |
| June 1 – August 31 | Sept. 15 |
| Sep. 1 – Dec. 31 | Jan. 15 (of following year) |
The IRS goes on to explain that if the 15th happens to fall on a weekend or legal holiday, the payment is due on the following regular business day.
Do you file quarterly estimated taxes? What’s your strategy for staying on top of these payments throughout the year?
Comment on this article
Comments
Johnny @. on December 17, 2012 at 12:14pm
Did I file quarterly estimated taxes this year? Yes. Did I enjoy it? NO. I don't know if there's ever an enjoyable time to fork your money over to Uncle Sam, but it seems like ripping that bandaid off once instead of slowly pulling it four times throughout the year is the way I'd prefer to do it. I created calendar reminders to make the payments and, fingers crossed, it got to them in time.
Ally on December 19, 2012 at 9:40am
Thanks for sharing your experience, Johnny! Definitely paying off taxes slowly throughout the year is the way to go for many of our customers.
Jon P. on December 22, 2012 at 2:35pm
You should pay 90% of your tax liability by January 15
Ally on December 26, 2012 at 2:47pm
Thanks for your feedback, Jon.
Adolfo on January 24, 2013 at 1:12pm
You can amend your 2008 tax reurtn, or claim it on your 2009 tax reurtn, just know that you will not receive the refund for the home buyers until processing is fully completed, processing of home buyer credit is taking up to 18 weeks. IRS will send you your 2009 refund timely. And when you do file for the first time home buyers credit make sure you include all the information needed and sign where it is required, If any information is missing and IRS must request additional info or signature, the process stops and then starts all over once your information is received. Adding another 6-8 weeks to the additional 16-18.Good luck!
Ally on January 29, 2013 at 6:56pm
Thanks for the tip, Adolfo!