If you are one of the nearly 30% of Americans who work for themselves, there are some specific tax requirements you will need to be aware of. Most importantly, you will need to pay taxes on a quarterly basis. If you fall into this category, you are sure to have some questions about the process.
To help you better understand the sometimes confusing process of quarterly taxes, here are some of the frequently asked questions we often hear.
Who has to pay quarterly taxes?
If you are self-employed or a small business owner, you likely need to pay quarterly estimated taxes. This includes:
- An independent contractor
- A sole proprietor in a trade or field
- A member of a partnership that conducts business, such as an LLC
- A person who runs a business as your own, including part-time
What are estimated tax payments?
Estimated tax payments arepaid throughout the year on income that is not subject to withholding. This income includes earnings from self-employment, interest, dividends, rents, and alimony. Taxpayers who do not choose to have taxes withheld from other taxable income should also make estimated tax payments.
How do I pay my estimated quarterly taxes?
You can pay your quarterly taxes via the Electronic Federal Tax Payment System or by using paper forms from the IRS.
When are quarterly tax payments due?
For the tax year 2022, quarterly tax payment deadlines are due:
- April 15, 2022
- June 15, 2022
- September 15, 2022
- January 17, 2023
Is there a penalty for underpaying estimated taxes?
Yes, according to the IRS, if you don’t pay enough tax throughout the year — either through withholding or by making estimated tax payments — you may have to pay a penalty. Generally, most taxpayers avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.
How can I ensure my estimated quarterly taxes are paid correctly?
The best way to ensure your estimated quarterly taxes are paid correctly is to hire a professional. Services such as Tax Preparation Denver-based will ensure that you are receiving all of the tax deductions you are eligible for so that you can keep as much of your hard-earned money as possible.