Do you work for yourself? Here’s the lowdown on when and how to pay your anticipated quarterly taxes.
What you’ll discover:
When are the projected taxes for the first quarter of 2023 payable for self-employed individuals?
How can I figure out my anticipated quarterly taxes?
How can I make my quarterly tax payments?
What happens if I don’t pay my quarterly taxes?
Maintain Your Tax Obligations
Self-employed company operators face several challenges. In addition to managing their firms’ day-to-day operations, marketing, sales, and financial management, they must also meet federal, state, and local tax reporting and payment duties. Estimated tax payments are one of the duties that enterprises struggle with.
Since the income tax system in the United States is a “pay-as-you-go” system, taxpayers are required to pay taxes on their earnings throughout the year. Employers routinely withhold and submit taxes, including the employee component of Social Security and Medicare taxes, to the IRS and state tax authorities. These payments must be made directly by self-employed enterprises.
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When are the projected taxes for the first quarter of 2023 payable for self-employed individuals?
The majority of small company owners must make projected payments for both income taxes and self-employment taxes. These projected taxes are payable quarterly, with a separate due date for each payment month.
In general, you must make estimated payments if your tax due for the year exceeds $1,000 after deducting withholding and refundable credits, and if your withholding and refundable credits are less than the taxes paid the previous year or 90% of the taxes owed for the current year.
The due date for most self-employed taxpayers for the first quarter of 2023, January 1 through March 31, is April 18th, the same as the year-end tax payment deadline for 2022. Nevertheless, firms having fiscal years that do not begin on January 1 are subject to unique requirements.
How can I figure out my anticipated quarterly taxes?
You may calculate your quarterly tax filing requirement based on your real quarterly profits if you work with a tax professional or utilize accounting software. You may also compute your expected total taxable income after deducting and crediting your deductions and credits, and then multiply your adjusted gross income (AGI) by the tax rate applicable to your income bracket.
If your income exceeds $400, you must pay both the employer and employee portion of Social Security and Medicare taxes. To calculate the amount of taxable income for self-employment taxes, multiply your expected total income by 92.35%, and then multiply that number by 15.3%. IRS Form 1040-ES might help you compute this amount.
Divide your projected income tax amount and estimated self-employment tax due by four (for four quarterly payments).
How can I make my quarterly tax payments?
You may make your federal quarterly anticipated tax payments in a variety of methods, including:
IRS Direct Pay is the website for the Electronic Federal Tax Payment System (direct payment from your bank account)
Pay with a credit or debit card (subject to fees)
Send a cheque or money order via mail.
If your state levies income taxes, you may be required to file quarterly estimated tax returns with the state tax authorities.
What happens if I don’t pay my quarterly taxes?
In most cases, if you do not make estimated tax payments but your withholding from other sources accounts for at least 90% of your total tax obligation and the amount withheld equals or exceeds the amount you paid in federal taxes the previous year, you will not be penalized or required to pay interest.
But, if you do not fulfill that condition, the IRS might apply penalties and levy interest from the day your estimated taxes become delinquent. The IRS calculates penalties for each required quarterly installment individually.
Maintain Your Tax Obligations
Do you have questions about whether you must pay anticipated taxes, or do you need advice regarding your individual situation?