Income taxes are continuously collected in the United States. For a lot of us, this means that our employers deduct a specific amount from each paycheck to cover our federal and state taxes.However, you might have to pay what the IRS refers to as “estimated quarterly taxes” if you are a freelancer or receive specific non-wage income.
What are estimated tax payments?
The taxes on earnings that are not subject to federal tax withholding that are paid to the IRS throughout the year are known as estimated tax payments.
This can include profits from freelance work or self-employment, as well as additional income from rewards, dividends, realised capital gains, and other non-wage sources.
When are estimated taxes due?
The IRS collects estimated tax payments on a quarterly basis, and they should be made as soon as income is collected.
However, these dates do not align with standard calendar quarters. Rather, they are expected in September, January, April, and June. Additionally, if you’d like, you can pay more frequently, according to San Mateo, California CPA Bess Kane.
Estimated tax payments 2024
April 15 was the deadline for the first quarter of 2024 tax payments. The last payment is due in January 2025, with the remaining dates being June 17 and September 16.
Who should make estimated quarterly tax payments?
If you are a citizen or resident alien of the United States and you did not owe any taxes for the preceding full tax year, you are not required to make estimated tax payments, according to the IRS.
Additionally, unless you have untaxed income, you most likely don’t need to pay estimated taxes. Less than 90% of your tax liability for this year, or 100% of your tax liability from last year, whichever is smaller, will be covered by your withholding and refundable credits.
If your adjusted gross income for the previous year exceeded $150,000, or $75,000 if you are a married couple filing separately, the threshold is 110%. self-employed individuals.
Kane believes that those who anticipate owing $1,000 or more in taxes, such as freelancers, independent contractors, and persons with side gigs, are excellent candidates for estimated quarterly taxes. Because there is no tax,
How to calculate quarterly estimated taxes?
There are multiple approaches. It all depends on how certain you are about your expected annual income and tax liability as to which approach makes the most sense for you.
Calculate using taxes from the previous year. You can calculate how much you’ll owe each year and send the IRS one-fourth of that amount. For example, you would send $2,500 every quarter if you estimated that you would owe $10,000 by 2024.
This might be most effective for those whose income is consistent throughout the year or for those who know exactly how much they will make.
