Freelancers and Small Business Owners: Heads up! The January 15 deadline for the last of your 2018 quarterly payments is just around the corner!! It is the last chance to make sure you’ve paid enough to avoid late payment penalties before you file your 2018 tax return.
No employer? Estimated tax payments are for you. If you have self-employment income, you get to be the boss- which means you also have to manage the tax strategy for your business.
Employers withhold tax from their employees’ paychecks to cover potential tax liability, and they send those withholdings to the IRS throughout the year. The same goes for you if you are self-employed and expect to owe more than $1,000 or more. If your taxes owed amount is less than that, you still have to report your income, but you are not expected to make estimated tax payments.
What to do if you’re expected to make estimated tax payments, but haven’t all year: The bad news- you’ll probably owe some penalties when you file your return. The good news- you can reduce those penalties if you make the required payments by the January 15 deadline.
How to calculate your estimated taxes? Everything you need to calculate and pay your estimated taxes is available on Form 1040-ES. It includes a worksheet, instructions, and tax rates for 2018. You’ll also want to have your 2017 tax return handy for reference. Or, contact me and I would be happy to assist/complete the forms for you.