quarterly taxes

Forum|Forum|4 years ago
October 27, 2021
3 replies
23 views

If I am filing quarterly taxes on my business, how does the work when I file taxes at the end of the year.

Best answer by JandKit

Hi Sweetdesigner,

Estimated taxes are filed quarterly. Every 3 months, you'd send a check to the IRS. At year's end, you would keep total of all checks sent to the IRS and show them on your tax return. Turbotax will handle the rest for you.

Here is a link that has an extensive amount of information that could be very helpful to you.

https://www.irs.gov/pub/irs-prior/f1040es--2021.pdf

For context, Page 9 shows the 4th and final payment with the other three immediately after it.

JandKitAnswer

Level 6

Hi Sweetdesigner,

Here is a link that has an extensive amount of information that could be very helpful to you.

https://www.irs.gov/pub/irs-prior/f1040es--2021.pdf

For context, Page 9 shows the 4th and final payment with the other three immediately after it.

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NextLevelOPM

Level 2

Hi there, I'm not sure if it's ok to hijack another user's question, but mine is related to quarterly taxes.

What's the penalty about, can you give an opinion/rule of thumb etc? As an example, I didn't want to remember to pay quarterly, so I paid 20% of my known contracts in July. Am I "clean", or do I have to pay quarterly (how strict are they)? The 1040 ES document link you provided noted "A penalty may apply even if you have an overpayment on your tax return." Great.

How "off" can you be in your estimates? I saw the 1040 ES document used a what looked like a $1,000 variance (pretty small variance if you ask me).

This year will be the first time I'll have to pay taxes on business income so I'm trying to learn the real rules of the road (vs. those in theory/high level ones).

Looking at the tax rate schedule on page 7, is it really as simple as between x and y +.24*(actual - x), divided by 4 (quarters)?

anyoneelse

Level 4

This is the best explanation of quarterly estimates I've found. Estimated Taxes: How to Determine What to Pay and When and A Guide to Paying Quarterly Taxes

If your prior year Adjusted Gross Income was $150,000 or less, then you can avoid a penalty if you pay either 90 percent of this year's income tax liability or 100 percent of your income tax liability from last year (dividing what you paid last year into four quarterly payments). This rule helps if you have a big spike in income one year, say, because you sell an investment for a huge gain or win the lottery. If wage withholding for the year equals the amount of tax you owed in the previous year, then you wouldn't need to pay estimated taxes, no matter how much extra tax you owe on your windfall.
If your prior year's Adjusted Gross Income was greater than $150,000, then you must pay either 90 percent of this year's income tax liability or 110 percent of last year's income tax liability.

You can always try TaxCaster and see what the estimates will look like too.