I used the turbo tax estimator to estimate my taxes for 2020. No W2 income this year. Only self employment income ...
I put in income as $68,000 (just an estimate, it could be more at the end of the year)
It put my estimated federal tax due as $12,824 .... my question is, does this include my self employment taxes which are at 15%? I am single and my standard deduction is $12,400 I believe.
At that tax bracket, income taxes are at 22% and estimated taxes at 15%... why does it say estimated federal tax due as 12k?
if my math is correct, $63,000 (income minus 5k expenses) - $12,400 = 50,600
22% tax + 15% SE tax is 37%. 37% of $56,000 is $20,720 ? Why does the estimator say 12k?
Also, do you have an estimator for state taxes?
At that tax bracket, income taxes are at 22% and estimated taxes at 15%... why does it say estimated federal tax due as 12k? You are forgetting we have a graduated tax bracket system so although your income may have hit the 22% bracket it is not all taxed at 22%.
if my math is correct ... it is not ... here is an educated guess ...
SE tax ... 63K x 15.3% = 9639
Fed tax ... 63K - 4820 (1/2 se tax ) = 58,180 - 12,400= 45,780 - QBI deduction (approximate) $12,600 = $33,180 ... tax from 2019 table (could not find a 2020 table ... see tax brackets below) is $3,787
Total estimated tax 3787 + 9639 = 13,426 ( may be other things I didn't consider).
Also, do you have an estimator for state taxes? No ... your state may have one... check their website.
Why are you not using the program's estimator instead ( FYI ... in the future use the downloaded version if you can ... use the Deluxe and save a few bucks ... then you can what if all year long) ...
What are estimated taxes?
Do I need to make estimated tax payments to the IRS?
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.)
How do I make estimated tax payments?
Can TurboTax calculate next year's federal estimated taxes?
Can TurboTax calculate the estimated payments for next year's state taxes?
Thanks for helping me with the math. That helps clear up a lot. I am actually using the Turbo Tax estimator and but it was the online version. I'll try the deluxe version next time. I just wanted to make sure that the amount was correct. I chose not to use my Estimated Tax Payments that Turbotax gave me as my income increased dramatically this year compared to 2019 so it wouldn't be accurate. I've been making ES payments online and it looks like I'm right on target as I've paid over 12k so far so I won't end up owing too much. Thank again!
Had a quick question about Fed tax ... 63K - 4820 (1/2 se tax )
Why did you use one half of SE tax... as someone who is self employed I am supposed to pay 15% or all of it.
Here's some math...........
You pay 2 different taxes. The regular income tax and the SE tax. The 1/2 of SE tax on line 8a and the personal 12,200 Standard Deduction line 9 and the QBI line 10 are only deducted from your income for the regular income tax.
The Self Employment tax on line 15 is 15.3% on 92.35% of your Net Profit.
63,000 x .9235 = 58,180.50
58,180.50 x .153 = 8,902 SE TAX
This only gave me a QBI deduction on line 10 of $9,270 instead of 20%. Looks like you have to deduct the 1/2 SE tax from your Net Profit (63,000-4,451) plus some other limitation.