Calculating Estimated Taxes

[KnotMo]

I am retired and collecting Social Security but have been working part-time as an independent contractor.  Although I had been paying my taxes in full when I filed my previous returns (2014-2021), last year (2022) for the first time I was penalized for failing to file estimated taxes, so I began paying them this year.  My question is about calculating the estimated payments.  Should my calculation be based on when I earned the income or when I actually receive payment for my services?

[LRay_EA]

Hi, "Each taxpayer must use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and the accrual method.
Under the cash method, you generally report income in the tax year you receive it, and deduct expenses in the tax year in which you pay the expenses.

Under the accrual method, you generally report income in the tax year you earn it, regardless of when payment is received. You deduct expenses in the tax year you incur them, regardless of when payment is made." IRS Publication 538

This means that most people will count income earned when they receive the money. That way if you work in December 2022 but aren't paid until January 2023 that income would not be included in your 2022 tax return but would be in your 2023 tax return. 

[rschule1]

Hi There:

Great answer above:  Here's a helpful add on-see link

The Turbo Tax – Tax Caster app is a helpful application to estimate future taxes

TaxCaster