I am self employed and Turbo Tax ask me if I had earnings from March, 2020 thru December, 2020 which I did, but during the year I had paid my Fed, SSA, and Medicare. When I entered the amount all of a sudden my refund jumped up quite a bit. Am I allowed this?
Usually, you pay your estimated tax payments in four equal installments. But you might end up with unequal payments in some circumstances:
If you had your previous year's overpayment credited to your current year's estimated tax payments
If you don't figure your estimated payments until after April 15 when the first one is due
If you unexpectedly make a lot of money in one quarter
How should I figure what I owe?
You need to come up with a good estimate of the income and deductions you will report on your federal tax return.
You can use TurboTax tax preparation software to do the calculations for you, or get a copy of the worksheet accompanying Form 1040-ES and work your way through it. Either way, you'll need some items so you can plan what your estimated tax payments should be:
- Your previous year's return. Use your previous year's federal tax return as a check to make sure you include all the income and deductions you expect to take on your current year's tax return. You should also look at the total tax you paid if you are going to base your estimated tax payments on 100 or 110 percent of your previous year's taxes.
- Your record of any estimated tax payments you've already made for the year. You need to take those payments into account when you determine how much tax you still owe, so have your check register handy to look up the amounts and the dates you paid.
Consider paying with your refund
One easy way to get a jump on paying your next year's taxes is to apply your previous year's tax refund to your next year's taxes. If you won't have federal income tax withheld from wages, or if you have other income and your withholding will not be enough to cover your tax bill, you probably need to make quarterly estimated tax payments. Having all or part of your overpayment applied to your estimated taxes is a relatively painless way to take care of at least some of what you owe for coming year.
Yes, as long as you have a balance due, you can defer self-employment taxes on the portion of your self-employment income earned from March through December. If you do not have a balance due, no deferral is permitted; the IRS won't send back to you what could have been deferred had you not already paid a sufficient amount of tax withholding and estimated tax payments.