In 2022, my income will be about 8000 from an employer and 80,000 as an independent contractor for multiple groups. I've been saving to pay my entire tax bill (which I estimate at about $14,000) when I file in early 2023, but recently learned that I might need to pay estimated taxes quarterly to avoid a penalty.
Can I pay all my income taxes when I file in 2023, or do I need to start making quarterly payments now?
Ann (filing as married filing jointly)
Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when tax return is filed. Estimated taxes are paid directly to the IRS and state agencies. You can now pay directly online. If you do not have an IRS account, you may want to considering setting one up: https://www.irs.gov/payments/your-online-account You can then easily make and track your IRS estimated payments. If you would like to calculate your tax liability for this year, if you have used TurboTax Desktop software you can use this to create various scenarios or you can also use the Turbo Tax withholding calculator at no charge: https://turbotax.intuit.com/tax-tools/calculators/w4/ . This can be used to calculate your tax liability for the year to use as your basis for your estimated tax payments. It will take into account W2, investments, withholdings, business earnings, etc. to calculate the estimated tax liability. Once you have determined the estimated amount of tax due for a tax year, you can then divide by 4 to determine the quarterly estimated tax payments. Be sure to also calculate and make estimated state payments, if your state requires you to do so.
Avoid a Penalty
To avoid a penalty, pay your correct estimated taxes on time. Find how to figure out your estimated taxes https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes.
You may avoid the Underpayment of Estimated Tax by Individuals Penalty if:
- Your filed tax return shows you owe less than $1,000 or
- You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less.
The IRS also offers a guide to help you determine if estimated tax payments are required (you will need prior year income and estimated current year income to complete this):
**Mark the post that answers your question by clicking on "Mark as Best Answer"