Quarterly taxes, also known as estimated tax payments, are a fact of life for US small business owners. As a freelancer / business owner, the IRS requires that you pay taxes not once, but four times a year. The second payment of 2019 is due on June 17th.
Most self-employed workers have no clue what information they need to pay them and/or how to pay them on time. There is so much information online about quarterly taxes and I’m sure some of it can be confusing and hard to understand.
I have personally been self-employed for over 6 years so I understand the struggle. Most of us became self-employed to be our own boss and to have a flexible schedule. We wanted to chase our dreams but still be able to pay the bills in the meantime.
One perk of being self-employed or independent is getting all of your money up front and not having to get taxes taken out of our checks like a regular W-2 job. The only issue is with that perk is the responsibility of paying the IRS manually every quarter.
In this guide, we’ll cover all the details of quarterly taxes and guide you through step-by-step how to file them.
Know the payment schedule
Quarterly tax payment due dates stay consistent every year. They follow the schedule as outlined below:
If you earn money between January 1st — March 31st then make a payment by April 15th.
If you earn money between April 1st — May 31st then make a payment by June 15th.
If you earn money between June 1st — Aug 31st then make a payment by Sept. 15th.
If you earn money between Sept 1st — December 31st then make a payment by Jan. 15th of the next year.
Know your income and expenses
It’s important to get all your tax documents from every employer that you have worked for and to make sure you know all your expenses so you can write them off as deductions.
If you’re having trouble estimating your income, I would suggest downloading the 1040-ES form here from the IRS website to calculate how much you should pay. This is great especially if you don’t want to owe the IRS next year for not paying quarterly. It makes tax time easier and less complicated.
If you’re having trouble accessing your tax deductions, you can always export your bank statements into a spreadsheet and add them up yourself.
Step 1: Calculate your payment
To calculate your payment, simply use Keeper’s free online estimated tax calculator, which will guide you through the process. Simply input your state of residence, taxable income, and tax status to see exactly how much you should pay.
Step 2: Pay The IRS (Federal)
Great news! There a few different ways to pay the government but one of the fastest is online. You can pay your taxes online with IRS Direct Pay or the Electronic Federal Tax Payment System(EFTPS).
The IRS offers several options to pay your quarterly estimated tax payments online. You can pay via your bank account for no fee or by credit or debit card for a fee.
Pay by Bank Account
If you choose the bank bank account option, you will be directed to a page where you can either make a payment or look up a payment you’ve made. To make your payment, click “Make a Payment.”
The next screen will ask you some information about the payment you’re making.
Under “Reason for Payment” select “Estimated Tax,” then select “1040ES (for 1040, 1040A, 1040EZ)” under “Apply Payment To” and “2019” (or the current year) under “Tax Period for Payment.”
The next screen will ask you to confirm that the information you selected is correct.
The next screen will ask you to verify your identity by providing information from a prior tax return. Select the year of the tax return you’d like to use for verification (up to 5 years prior) and provide the following information:
- Filing status for that return
- Full name
- Social security number
- Date of birth
- Country of Residence
- Street Address (that you put on the prior year return)
Next, enter the amount of the payment you wish to make, the date you’d like it made and your bank account information. Note that you can schedule payments up to 30 days out.
Click continue, confirm your payment and you’re all set!
Paying by Credit Card
If you opt to pay by debit or credit card, select the Debit Card or Credit Card” option.
This will take you to a page with links to the 3rd party payment processors you can use to make a payment. Note that each has different fees for debit and credit cards, so you’ll want to choose the best option depending on your method of payment.
Once you choose a payment processor, you’ll be directed to their site to make your payment. Follow the instructions on the processor’s site to make your quarterly estimated tax payments.
Other Ways to Pay
You may also make your payments via the Electronic Federal Tax Payment System, Electronic Funds Withdrawal or same-day wire. Visit the IRS’ Payment page and click on the link for your chosen payment option.
The benefit to using the Electronic Federal Tax Payment System (EFTPS) vs directly paying via bank account above is that EFTPS allows you to schedule quarterly and recurring payments up to 1 year in advance, which is great if you routinely need to make quarterly estimated tax payments. However, registration for EFTPS can take up to 5 business days to process (you will receive a pin code in the mail) so this is not a great option if you’re making your payment at the last minute.
Step 3: Don’t Forget To Pay Your State Tax
Make sure to look up your state revenue office website. On the website, it will have details on where to pay and which tax forms that your state needs.
Remember that this is your hard earned money and that you should make sure to pay the IRS before you are penalized and have to pay interest and additional fees. Paying quarterly will also help people who forget the filing deadline or people who hate tax time every year.
The post The Ultimate Guide to Quarterly Taxes appeared first on Tweak Your Biz.
source https://tweakyourbiz.com/finance/taxes/filing-quarterly
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