Quarterly tax estimates federal and state

[joenobodyyet]

I have always thought that taxes were due in April. However, a few years ago I learned that I need to pay quarterly tax estimates. So last year I electronically paid four tax estimates to irs.gov. The woman at the Philly, PA tax office told me to pay whatever I made for that quarter multiplied by .0307. NOTE: I paid quarterly taxes to irs.gov, and I did NOT pay any other quarterly taxes (to Pennsylvania).

This year I have been mailing checks to the PA Department Of Revenue. Until now, I didn’t think it mattered if I sent payment electronically to irs.gov or by mail to Pennsylvania Dept. of Revenue.

Now I’m sure people will think I’m an idiot, and you’re right. I’ve always had taxes taken out of my paycheck until recently, so the last few years have been the first time I’ve done my own taxes. I always use services like TurboTax to do my taxes before the April deadline. I’ve scoured the internet and have never found anyone explaining that I need to pay quarterly taxes to BOTH the IRS and to Pennsylvania Dept Of Revenue. But recently I learned that I’m pretty sure  I am supposed to pay quarterly taxes to both. I figured the IRS was related to all state taxes, but like I said, I’m an idiot and I never learned this stuff.

Anyway, can someone with more knowledge please confirm how much I’m supposed to pay to IRS.gov and how much I’m supposed to pay to Pennsylvania Dept. of Revenue? I read that IRS asks for your income multiplied by .9235, then multiply that by .029. This year I haven’t submitted anything to the IRS, so should I mail a check now even though I missed the first three quarter dates?

For Pennsylvania, I have read that I owe my income multiplied by .0307. I guess I will mail a fourth check at the end of the year to Harrisburg, PA.

Are these amounts correct? Why are federal quarterly estimates lower than state?

Any help is greatly appreciated. I don’t want to keep having to pay penalty fees, but I haven’t learned any of this stuff before. 

Should I sign up for a class or something? How to people learn this stuff? 

Thanks in advance

[Hal_Al]

You are totally confused.  Most of what you've been told is irrelevant, especially "multiplied by .9235, then multiply that by .029". 

The simple formula is look at your previous year tax liability. Divide that number by four and send in four equal quarterly payments.

Estimated tax payments are NOT required at either the federal or state.  But, you may be subject to an underpayment penalty, at tax time, if you did not pay enough through withholding or estimated payments.

On the federal return, an underpayment penalty is due if you owe more than $1000 at tax time.  For PA, the penalty is due if you owe more  $246.  The penalty is small. There are people, who just pay the penalty rather that "bother" with estimates.  

TurboTax (TT) can prepare the quarterly payment vouchers. In your 2020 software, enter at:

 Federal Taxes or Personal (H&B version)

-Other Tax Situations

  -Other Tax Forms

    -Form W-4 and Estimated Taxes - Click the Start or Update button

On the next screen answer No to the W-4 question

There's a similar section in the state program, usually at a page titled "A few things before we wrap up your taxes" (I'm not specifically familiar with the PA progrm).  

To avoid the penalty, you should make estimated tax payments for the current tax year if both of the following apply for federal:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
- 2. You expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your current year’s tax return, or  100% of the tax shown on your prior year’s tax return. (110% if your income will be more than $150K) . 

 If your goal is just to avoid the underpayment penalty, then paying 100% of the prior year tax liability is the “safe haven”

For PA rules, see: https://www.revenue.pa.gov/FormsandPublications/FormsforIndividuals/PIT/Documents/2021/2021_rev-413i...

[Critter-3 · Accepted solution]

If you are new to being self employed, are not incorporated or in a partnership  and  are acting as your own bookkeeper and tax preparer you need to get educated ....  

If you have net self employment income of $400 or more you have to file a schedule C in your personal 1040 return for self employment business income. You may get a 1099-Misc for some of your income but you need to report all your income.  So you need to keep your own good records. Here is some reading material……

IRS information on Self Employment….
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center 

Publication 334, Tax Guide for Small Business
http://www.irs.gov/pub/irs-pdf/p334.pdf 

Publication 535 Business Expenses
http://www.irs.gov/pub/irs-pdf/p535.pdf 

Home Office Expenses … Business Use of the Home

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/pub/irs-pdf/p587.pdf

Publication 946 … Depreciation

https://www.irs.gov/pub/irs-pdf/p946.pdf

          

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Self Employed return and will help you keep up in your bookkeeping all year along with calculating the estimated payments needed ....
http://quickbooks.intuit.com/self-employed

          
Self Employment tax (Scheduled SE) is generated if a person has $400 or more of net profit from self-employment on Schedule C.  You pay 15.3% for 2017 SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  You do get to take off the 50% ER portion of the SE tax as an adjustment on line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 line 57.  The SE tax is in addition to your regular income tax on the net profit.
 


PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2017  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year, You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

OR Go to….
Federal Taxes or Personal (H&B version)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

What are estimated taxes?

https://ttlc.intuit.com/replies/3301588

Do I need to make estimated tax payments to the IRS?

PAYING ESTIMATES
For SE self employment tax - if you have a net profit (after expenses) of $400 or more you will pay 15.3% for 2015  SE Tax on 92.35% of your net profit in addition to your regular income tax on it. So if you have other income like W2 income your extra business income might put you into a higher tax bracket.

You must make quarterly estimated tax payments for the current tax year (or next year) if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits. 
 
- 2. You expect your withholding and credits to be less than the smaller of: 
    90% of the tax to be shown on your current year’s tax return, or 
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

https://ttlc.intuit.com/replies/3301891

                    

How do I make estimated tax payments?

https://ttlc.intuit.com/replies/3301258

Can TurboTax calculate next year's federal estimated taxes?

https://ttlc.intuit.com/replies/4242911

Can TurboTax calculate the estimated payments for next year's state taxes?

https://ttlc.intuit.com/replies/3301735