When paying your quartarly estimated taxes are you required by the IRS to send in the exact same amount every quarter?
No. You can send in $2000 for one quarter, and $1 the next quarter. THen if you have a quarter with absolutely no provide, you don't have to send in anything.
Generally after your first year of self-employment you'll have a fairly good idea of what you're going to make the next year. So for example, if in the first year:
- YOu make $1000 the first quarter and send the IRS $200.
- You make $5000 the second quarter and send the IRS $1000
- You make $10,000 the third quarter and send the IRS $2,000
- You make $3000 the third quarter and send the IRS $600
So overall you made $19,000 the entire year. It's a good bet that you're going to do a bit better your second year, and with the above numbers it looks like the 4th quarter is the "slow season" for the business. So based on that, my guess is that I"m going to make at least $22,000 my second year. That would be an "average" of $5,500 each quarter. Twenty percent of $5,500 is $1,100. So regardless of what I make each quarter I'm sending the IRS $1,100 each quarter.
Now lets suppose I do the same for the first two quarters as I did my prior year in business. But for the third quarter I make a whopping $20,000 profit in just that quarter alone. That means I'll be making $10,000 more for the current tax year, than I did the previous tax year.
So I'll just add another $20 to my planned $1,100 third quarter payment, and send the IRS $2,200 for that quarter. I could also split that 20% between my last two quarterly payments if I wanted to also, if I again expected my fourth quarter to still be my "slow season" like it was the previous year.
