I just became a consultant for a company, an independent contractor. It's part-time but I do earn more than $600/mo. My questions are, how can I make sure I'm deducting enough taxes and do I need to file quarterly?
Yes, you need to file quarterly. Your Quarterly filing is based on your annual income, not your income for the quarter (why yes, that is a PITA to figure). I'm in Florida, so when I was an IC, I automatically put 40% of my income into a savings account, and that was enough to cover Federal Income Sax, FICA, and Self-employment tax. If you need to pay State Taxes, track down the requirements for that, and up that 40% to a number large enough to cover State as well.
I have a similar curiosity re: what you're asking Michael. I was wondering if it is required that you have to pay estimated taxes yourself to the IRS & your State quarterly and if so, how these amounts are determined. I thought it was optional to pay estimated taxes, but I was told that if you don't pay the estimated taxes, you would have to pay an underpayment penalty at the time you file your return in addition to the taxes due. I'd appreciate some feedback regarding this subject! Thanks for your question Michael!
You will pay a penalty for underpaying your taxes if you don't do it quarterly. Plus, for me, I was happier not having that money where I could grab it. The IRS is unforgiving, so I pay them on time, and I overpay them enough so that at the end of the year I *know* I'm getting money back instead of writing a check.
Not a silly question at all Michael! From what I saw on the IRS website, the due date schedule is as follows:
Quarter 1 (Jan.1-Mar.31) Payment due Apr. 15th
Quarter 2 (Apr. 1-May 31) Payment due Jun. 15th
Quarter 3 (Jun. 1-Aug. 31) Payment due Sept. 15th
Quarter 4 (Sept. 1-Dec. 31) Payment due Jan. 15th of following year
Actually, I thought it was the same schedule you mentioned, but when I looked it up before responding, the schedule I posted is what I saw directly from the IRS website. Not sure if they changed it at some point, but check it out. I googled "when are estimated tax payments due," and then went to a link for the IRS website that shows the info I shared.