In case you’re wondering what estimated tax payments are, they are periodic payments that you make to the IRS. Most Americans must make them quarterly, and they are due on the 15th day of each month, April 15, June 15, and September 15. You should pay these on time so that you can avoid being late with your taxes. To make it easier for you, we’ve listed all the requirements below. You can follow them to the letter.
The most common reason people have to make estimated tax payments is because they do not have their income automatically withheld by their employer. These types of income include self-employment, business earnings, dividends, rental income, and interest. Most business owners, however, are required to make these payments, as they receive K-1s for their company interests. You may be surprised to learn that estimated tax payments can be as little as $200, depending on the amount of your earnings.
If you’re wondering how to make an estimated tax payment, there are several ways to do it. You can mail the IRS a check, use the IRS2Go App, or even make an online payment. Whatever method you use, just be sure you send the money before the due date! If you’re not sure how to send the money, you can always use the Estimated Payment Calculator provided by the Center on Budget and Policy Priorities.
In addition to the penalties, if you don’t pay the minimum required amount, the IRS assesses a 0.5 percent late penalty. This fee increases each month until your taxes are paid, and it capes at 25 percent. For more information, refer to Publication 505.
When your business is established, you need to start making estimated tax payments. In fact, this is required if you’re planning on starting a small business or launching a side hustle. While you can use your own checking account for business expenses, it’s recommended to set up a separate business account for it. It’s also best to speak to your tax preparer before writing a check. You’ll also need to set up a separate business bank account.
Estimated tax payments are not as hard as you think. The IRS provides a worksheet, Form 1040 ES, to help you calculate your estimated tax payments. To calculate your estimated tax payments, you’ll need to know your taxable income. This can be a ballpark figure from last year or a projected income for this year. You’ll also need to estimate the amount you’ll need to pay.
Estimated tax payments are a helpful financial tool for freelancers, entrepreneurs, and independent contractors. Many people dread tax season in March and April, but with the help of the IRS, you can manage your finances more efficiently. The deadline for filing tax returns is April 15 – be on the safe side by making estimated tax payments. The sooner you do so, the better. But if you’re unsure how much money you’ll make, check out Bankrate.