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How To File Estimated Quarterly Taxes Online

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 6 minute read

United States citizens are taxed on a “pay as you go” basis. Every pay period, employers collect income tax from workers and remit the funds to the Internal Revenue Service (IRS). They will automatically receive a refund if they file their taxes by the IRS’s deadline.

In contrast, most sole proprietors and independent contractors do not have a human resources department deducting taxes from their paychecks and instead must make quarterly anticipated tax payments throughout the year.

Quarterly estimated tax filing requires a little additional effort, but it keeps you in the tax loop. And if you learn to do it well, it can keep you from having to fork up all the cash at once.

What Is the Meaning of Estimated Tax Payments?

The law requires that employers deduct and remit federal, state, and local income taxes from their employees’ paychecks. Those are deposits against your anticipated tax bill when filing your tax return. The details of your annual withholding may be found on your W-2 form.

In the event that you overpaid by the time you submit your taxes, you will receive a refund. You will need to spend more to make up the gap if you made an insufficient down payment. The most up-to-date W-4 form submitted by each employee is used to calculate their withholding allowances.

However, if you’re on your own, you’ll have to act as your own human resources department. That might force you to make payments in the form of estimates. You must calculate how much you anticipate you will owe in taxes to the government for the current tax year in order to make an anticipated tax payment.

After that, you send in the complete sum over the course of four quarterly installments. Estimated payments are due every three months on the 15th of April, September, and January.

The Internal Revenue Service (IRS) will assess a penalty for failing to pay estimated taxes if you don’t make the required quarterly estimated tax payments. To avoid this, it is important to understand if projected tax payments are required, how much you owe, and where and when to deliver the money.

Who Is Required to Pay Estimated Taxes?

Officially, you are required to make anticipated tax payments if you anticipate having a tax liability of more than $1,000 when filing your yearly return. If you are in one of two categories, you can probably relate to it.

  1. Those who are self-employed full-time and those who own small businesses. Regular anticipated tax payments are often required of those who file as sole proprietors, shareholders in S corporations, partners in partnerships, self-employed individuals, or members of single-member LLCs.
  2. Work-at-Home Freelancers Who Also Have a Day Job. Find out how much of your income is untaxed if you have a regular employment that deducts taxes from your paycheck and also do side business for which you receive a 1099-NEC or whose clients or customers pay you directly. You should submit anticipated tax payments if your income from freelancing exceeds a certain threshold.

How to Calculate Your Taxes

Estimated tax payments are often calculated by tax preparation software if you owe $1,000 or more and utilize a service like H&R Block. Also, it creates four vouchers for you to utilize to send in your anticipated tax payments next year on Form 1040-ES.

If you don’t have access to a calculator, the IRS provides guidance on how much estimated tax to pay on Form 1040-ES. If you choose to mail in your payments, vouchers are included with Form 1040-ES.

If your income from self-employment fluctuates throughout the year, you may be able to make installment payments at different times to better align your outgoing cash flow with your incoming cash flow. Avoid late fees by making at least the quarterly minimum payment by the due date.

In addition, you can submit more than four quarterly payments during the year. You can print off a 1040-ES payment voucher from the IRS website and include it with your supplementary payment.

When a freelancer or independent contractor has a healthy yearly net profit, they may find themselves with a hefty tax burden to pay. The hefty sum results from their having to pay both income tax on the business’s profits and self-employment tax. Estimating your entire tax burden might be complicated due to factors like self-employment tax.

Your self-employment tax may be calculated with a simple calculation. Multiply your Schedule C net profit by 92.35% and then by 15.3%. This is the amount you must pay in taxes as a business owner. A self-employed person with a net profit of $10,000 would figure their self-employment tax as follows. $10,000 x 0.9235 x 0.153 = $1,413.

You may deduct half of this amount ($707) from your yearly income when you file your taxes. You may save a few dollars in income tax if you do that, but it all depends on your own tax situation. If you want to be absolutely sure you’re paying the right amount of self-employment tax, it’s preferable to include the complete amount in your projected tax payment. The self-employment tax is calculated as part of the overall tax when the program creates your 1040-ES forms.

Paying Estimated Taxes

Payments of anticipated taxes can be sent in a number of different ways.

  • Mail your money.
  • There is a nominal “convenience charge” when paying online with a debit or credit card.
  • Employ the Electronic Federal Tax Payment System (EFTPS), which requires registration but is free of charge.
  • IRS Direct Pay is a free service that allows you to pay by ACH from your checking account.
  • Pay via the IRS2Go app on your mobile device.
  • Plan a direct debit with your tax software.

The EFTPS registration process is straightforward. A valid bank account, Social Security or employment identification number, phone number, and physical address are all that is required. If you want your tax return to go to the IRS on time, you must utilize their official postal address.

It takes the IRS roughly a week to mail out PINs. You may use that PIN to get into their website whenever you choose in order to arrange a payment. If you have an EFTPS-enabled bank account, you can arrange future withdrawals at any time.

There is a wide variety of tax preparation programs available, and some of them allow you to set up a direct debit. The payment will be automatically debited from your account on the day and in the amount that you choose.

Set up a savings builder account with CIT Bank and deposit money into it every month to help you save up for your quarterly tax payment. When compared to other savings options, the interest rate offered by this account is among the best.

When Should You Pay Estimated Taxes?

You are required to submit your quarterly tax return within 45 days after the end of the quarter in which the profits were earned. Each quarter is made up of the same number of weeks, although the second quarter is just two months and the fourth quarter is four months.
Scheduled 2022 tax payments are expected to be:

  • First Quarter (Jan. 1 to March 31): April 18, 2022
  • Second Quarter (April 1 to May 31): June 15, 2022
  • Third Quarter (June 1 to Aug. 31): Sept. 15, 2022
  • Fourth Quarter (Sept. 1 to Dec. 31): Jan. 17, 2023

Bottom Line

If you’re a “better safe than sorry” taxpayer who is concerned about underpayment, you may either increase your federal income tax withholding if you have full-time employment or overestimate your quarterly tax payments if you’re self-employed. At tax time, it’s nice to get a refund, but keep in mind that you effectively gave the government that sum of money at zero percent interest.

More than 10 million taxpayers are expected to be fined for not completing anticipated tax payments, so the IRS has launched a campaign dubbed “Pay As You Go So You Won’t Owe” to educate them. It is suggested that you pay anticipated taxes or change your withholding to avoid the fee.

Estimated tax payments can be used as a means of financial planning. Not only do they force you to plan your yearly income and expenditures, but they also assist you in setting aside money for your tax payments in a timely manner and within your budget. One way to keep track of your money is to create a payment budget.

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