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What the Heck Do I Do About Estimated Taxes?

What the Heck Do I Do About Estimated Taxes?

What the Heck Do I Do About Estimated Taxes?

Quarterly taxes, business taxes, estimated tax payments — are these all the same thing?

Federal estimated tax payments are quarterly payments paid on your business or self-employed income. In Washington State, we also have State Business and Occupancy taxes.

Do I need to make estimated tax payments?

If you fall into both of the following categories you had better pay in estimated taxes:

  • You are expecting to owe at least $1,000 or
  • Your withholding will be less than: the smaller of 90% of your 2019 taxes or 100% of your 2018 taxes.

How do I calculate what I should pay in?

The safe harbor of paying estimated taxes means you won’t get hit with any interest or penalties. The safe harbor number equates to either:100% of your prior year taxes or 90% of your taxes owed for 2019.

So if you total tax bill in 2018 was $5,000, you need to pay in $5,000 over the quarterly payment dates. This is the easiest way, but if you are making more money in 2019, you’ll still owe additional money when you file your taxes.

The due dates for your estimated tax payments are below:

  • April 15, 2019
  • June 15, 2019
  • Sep. 15th 2019
  • Jan. 15, 2020

You can pay online: www.irs.gov/directpay

That wasn’t too hard, was it?

Uh, wait. What if it is my first year in business?

Well, then we have to do a bit of math or use a friendly app. Each quarter you will need to pull your net profit from your accounting software (if you don’t have accounting software, please talk to an accountant), and you will need to calculate your tax on that net profit.

You can either do the math yourself, get us to do it, or use one of the various apps out there that will do it for you, such as:

  • Tax Calculator by TaxSlayer – Apple App Store, Google play or Web App
  • Total Tax Insights by AICPA – Web App

I suggest using one of the apps if you don’t want to learn the details behind estimated tax payments. If you do want to learn the details, check out 2019 Form 1040-ES.

As always, please consult your tax advisor.

TL;DR: Make sure you pay your quarterly estimated taxes, if you need help, contact us.

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