Your Income Taxes
(rule #1: Don't Freak Out!)
Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.
Who Must Pay Estimated Tax?
People or businesses who do not have tax withholdings via W-4 and will owe the government over $1000 in taxes in a year must pay quarterly estimated taxes.
How To Figure Estimated Tax?
To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.
1. When figuring your estimated tax, it may be helpful to use your income, deductions, and credits for the pervious year as a starting point. Use your previous year's federal tax return as a guide.
2. You can use the worksheet in Form 1040-ES (PDF) to figure your federal estimated tax. If you estimated your earnings too high, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated taxes for the next quarter. You want to estimate your income as close as you can to avoid penalties.
3. You can use the worksheet in form 42A740-S4 (PDF) to figure your state estimated tax.
You must make adjustments both for changes in your own situation and for recent changes in the tax law.
When To Pay Estimated Taxes?
For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.
You must make adjustments both for changes in your own situation and for recent changes in the tax law.
When To Pay Estimated Taxes?
For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.
Quarter 1 due- April 15
Quarter 2 due- June 15
Quarter 3 due- September 15
Quarter 4 due- January 15 (of the following year)
Electronic Federal Tax Payment System vs Postal Voucher Payment System?
Using the EFTPS system is the easiest way to pay your federal taxes for individuals as well as businesses. Make ALL of your federal tax payments including federal tax deposits (FTDs), installment agreement and estimated tax payments using Electronic Federal Tax Payment System (EFTPS). If it is easier to pay your estimated taxes weekly, bi-weekly, monthly, etc. you can, as long as you have paid enough in by the end of the quarter. Using EFTPS, you can access a history of your payments, so you know how much and when you made your estimated tax payments. Or you can use the traditional postal voucher payment system that comes with the 1040 ES. You physically mail these vouchers in with a check for your tax payment.
Using the EFTPS system is the easiest way to pay your federal taxes for individuals as well as businesses. Make ALL of your federal tax payments including federal tax deposits (FTDs), installment agreement and estimated tax payments using Electronic Federal Tax Payment System (EFTPS). If it is easier to pay your estimated taxes weekly, bi-weekly, monthly, etc. you can, as long as you have paid enough in by the end of the quarter. Using EFTPS, you can access a history of your payments, so you know how much and when you made your estimated tax payments. Or you can use the traditional postal voucher payment system that comes with the 1040 ES. You physically mail these vouchers in with a check for your tax payment.
State postal voucher payment system?
Like federal taxes, you may choose to pay your quarterly estimated taxes online electronically or via the postal voucher system. For Kentucky's vouchers Click Here . Right now there is no electronic system in place for state estimated tax payments.
City & School Taxes?
If you bill client time in a city the money you earn is subject to city & school taxes. Every location is different, but you should take the time to contact the proper authorities (urban county gov & school board) to find out. These taxes are generally pretty low, but important to pay none the less. You will pay these taxes after filing Federal and State for the year. In some major cities they allow you to make quarterly estimated payments through a voucher system just like state & federal.
Click here for Fayette Urban County Government tax forms
Click here for Fayette County Board of Education Occupational License Tax Forms
Click here for Fayette Urban County Government tax forms
Click here for Fayette County Board of Education Occupational License Tax Forms
REMEMBER: Taxes can be a head ache but are a necessary evil. Just do your best to pay State & Federal 4 times a year and keep clear records of your expenses.
Posts
