Estimated Taxes

As a self employed webmaster or freelancer, you’re required to make estimated income tax payments to the IRS. Most people who hold a job and receive a pay check don’t have to worry about estimated taxes, as these estimated taxes are automatically taken out of their paycheck as “income tax withholding”. Since no one is withholding your taxes to send to the IRS, you need to do it yourself by sending the IRS a quarterly estimated taxes return (Form 1040-ES) and payment. These estimated taxes are based on your last tax year’s earnings and are paid quarterly. Estimated Taxes are not an “additional” tax on top of the income tax, but rather a down payment on this year’s income tax liability.

Do I have to Pay Estimated Taxes?

You do not have to pay estimated tax for the current year if you meet all three of the following conditions.

  • You had no tax liability for the prior year
  • You were a U.S. citizen or resident for the whole year
  • Your prior tax year covered a 12 month period

Since estimated taxes are generally based off of last year’s profits, if your business is less than a year old, you do not have to pay estimated taxes.

Who Has to Pay Estimated Taxes?

As previously mentioned, Estimated Taxes are generally aimed at self employed individuals. Anyone who is a sole proprietor, partner, or S-Corporation shareholder who estimated at least $1,000 in income tax liability for the year must complete Form 1040-ES quarterly.

When are Estimated Taxes Due?

For the Period Due Date
January 1-March 31 April 15
April 1-May 31 June 15
June 1-August 31 September 15
September 1-December 31 January 15 (of the following year)

Failure to pay estimated taxes can result in penalties.

Further Reading:

IRS Estimated Taxes Pages

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