How to Calculate Quarterly Estimated Taxes | simpleetax

This was Part 2 from the Chicago Vocal Arts Consortium's Facebook Live event. In this video we cover Best Practice Tip #2 for 2018 - How to Calculate and Pay quarterly estimated tax payments.
IRS Link: directpay.irs....
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This video is for entertainment and informational purposes only and should not be considered tax advice. By watching or commenting on this video, we are not forming a professional relationship. If you seek specific tax advice, please consult a CPA from your local area.

[@LeeHarveyOswald1000]

Why does the government have to make everything complicated for business owners. Why do we have to pay quarterly and calculate it ourselves. Why can’t we just report it at the end of the year then the irs tells us how much we need to pay, then poof we pay it.

[@rockwithyou2006]

because it's the govt's money and you are sitting on it for 1 full year. Also, what if you end up spending the tax you owe and go broke by the time it comes to paying the taxes?

[@holyshit2709]

It’s all a part of the game.

[@andywebb4861]

@@rockwithyou2006 Wrong, it is OUR money and they take it. In what world should My money get taxed 30% when I earn, again when I spend it, and again when someone else receives it.

[@rockwithyou2006]

@@andywebb4861 I get taxed at around 40% if you include state. But unfortunately its not my money because unless our politicians get the tax to zero or less, we owe it to IRS.

[@willoughbykrenzteinburg]

Because it is far easier to collect when you make people pay it out over the course of a year. If the IRS allowed taxpayers to wait until the end of the year without penalty, then they would be less likely to collect taxes, and you would see other taxes increase to make up for it. So, if you want taxes to stay low (relatively speaking), pay your quarterly estimated tax payments.

[@thuyvuong3288]

Thank you! Thank you! Thank you! You literally saved me from this tax filing madness as a freelancer. I do not ever leave comment. But I have to this time. You are so comprehensive. And you make it so simple and easy. All the best to you!

[@emilylarranaga2267]

Wow thank you so much! This was so clearly explained for someone like me who felt clueless. I really appreciate the help!!

[@locumcpa]

I'm so glad!

[@mitzisnails9209]

Wow absolutely simple. Thanks. I did quarterly estimated payments for 2018, haven’t done out taxes for 2018 yet, but I will just calculate on 2017, because last year we made more money than this year we would do.

[@locumcpa]

Thank you for the support!

[@ManifestYourself]

What happens when it's your first year paying taxes on 1099?

[@InfoCannon]

Manifest Yourself exactly, I second this

[@locumcpa]

Thank you for the question. If you're estimated to owe more than $1k in taxes for your business/1099, you should be submitting quarterly estimates. Thank you for your support, apologies for the delay!

[@jimmyolivares9429]

​@@locumcpa lets say i just started as a Sole Proprietorship contractor in January and I know my monthly income and how much Ill make by the end of the year (example like 18,000 by the end of this year) how much would my quarter estimate be?

[@locumcpa]

@@jimmyolivares9429 Thank you for the question. I would set aside at least 30% of the $18k for Federal taxes. Which means you should estimate to pay/submit about $1,350 per quarter to the Federal government. Thank you for watching and supporting the channel.

[@jimmyolivares9429]

@@locumcpa thank you so much!

[@JonVlogsYT]

Long story short(which is already pretty short, thank you haha), take the previous tax year's payment and divide it by 4. The result is then what you pay each quarter. Even if you had a much better income the following year, which is technically underpayment, you won't get a penalty. I made 700th subscriber btw c:

[@TherapistTamaraHill]

This is great!! Thank you!

[@DD-pk7vu]

Never leave any comments but this was very helpful.

[@locumcpa]

Thank you DD, much appreciated!

[@cartonet8186]

What about the annualized quarterly estimated taxes that happen when your income varies too much and you risk underpayment? For example you make little money throughout the first part of the year, but make all your money during the summer. I'm curious to see how that works and I think you have to file Form 2210

[@sashasmith9947]

How will you know if you owe more than $1000?

[@rocastyle86]

DO YOU HAVE TO PAY QUARTERLY FOR STOCK CAPITAL GAINS

[@locumcpa]

Yes

[@antoinettewatson1632]

Thank you.

[@locumcpa]

You're welcome!

[@bblgumkid]

Please help! I used turbo tax last year and I dont see anything on line 62 😣 plus I'm in commission now and dont think I can use last year as a gauge... what to do

[@Scord2222]

Great Video! Thank you!!

[@famfeld]

Thanks for the great info from the back of the church

[@kevinitman1694]

Great job. Thank you for sharing the information. I have quick question regarding having both w2 and self employee income. For quarterly tax estimation as long as the Federal tax on w2 is already paid, should I only calculate the estimate for self employee tax?

[@version2media]

if i plan to create a single member llc in texas next month. january 2020...i wont pay taxes for the llc until next year correct? on april 15, 2021....then from there on i'll do the quarterlies if needed/depending on amount made the 1st year..etc. or if i start llc january 2020, i'll have to pay 4 months later april 15, 2020?

[@kjp6438]

You will pay your first quarterly tax on APRIL OF 2020

[@kjp6438]

Your very LAST quarterly payment for income tax year 2020 will be due January of 2021.

[@version2media]

@@kjp6438 hmm...that's not what i've been told on here by others. --- how can i pay quarterlies on nothing to go off of. -- confused again now

[@locumcpa]

Thank you both for the question and comments. In regards to quarterlies, they are due when income in earned. For example, if you earned income during Jan-March 2020, you should pay the respective quarterly for such income by April 15, 2020. If you opt to pay all your 2020 taxes due in 2021, you should expect to pay penalties and interest on late payment. Thank you both again for supporting the channel!

[@version2media]

@@locumcpa i had 4 other tax videos & some sites say different. said you don't pay quarterlies till the next year, that the 1st year is to figure out your totals & then starting next year....you start paying your quarterlies based off what made 1st year. then go from there. ::sigh:: thought i had figured out already lol :(

[@tiffanyhackler7788]

Do you pay your quarterly tax payments using your business bank account or your personal bank account? Please I’m so confused!

[@visualizecreate2530]

Why doesn’t the IRS allow companies to make federal tax payments on 1099 filings as they do for W2 payments, I.e., the company who makes the payment can withhold taxes and remit it on behalf of the payee. They allow for backup withholding but not for someone who just wants to remit an additional tax payment. It just seems that it should be an obvious option for them to get additional tax revenue electronically and automatically instead of waiting for people to do on their own.

[@jkoolii]

so if you just started and this is your first year and your last years tax liability was 0 there will be no penalties am i correct?

[@locumcpa]

Thank you for the question. If you're estimated to owe more than $1k in taxes for your business, you should be submitting quarterly estimates. Thank you again for your support!

[@nick_brown]

Simple. Thank you.

[@trendyyvideos6201]

Super good channel

[@johnstuckey6323]

What if you didn’t work last year but you work commission this year. How do you estimate

[@Ryder_Studios]

So my question is how to estimate my payments if I received a W2 for 2019 but will receive a 1099 for 2020? Do I estimate payments based on my 2019 W2? 2020 will be my first year receiving a 1099 and will not receive a W2 for 2020

[@cassidyfleming4621]

Can someone answer this please I need to know this

[@kenzboard]

what if this year is worse or you have made no money this quarter when compared to last year at this time? so you still submit the same amount as last year?

[@locumcpa]

Thank you @kwizzle for the great question. If you made no income this quarter, then no need to submit a quarterly payment for the quarter. Have a wonderful day!

[@ajamusic7322]

How do you estimate this if your taxable income is all self-employed, and this year you are going to elect S-Corp Tax Status?

[@locumcpa]

Thank you for the question. I would still set aside at least 30% for your quarterlies. Once you elect S-Corp status, I highly recommend hiring a CPA to help you begin calculating specific quarterlies on your distributions.

[@TheCupfulBoy]

I probably have $5000 for my 1099 but I don't owe any tax(2000 refund) last year...do I need to pay quarterly? it's my first year getting 1099...also I dont have line 63 on my turbotax 1040. the total tax is 0 in my case

[@michellericketts3218]

Hi Steve! Your video has provided great insight on 1099 quarterly payments. My question is, what if the 1099 assignment is short term, such as 3 months. How do I calculate SE Tax for just 3 months? The remainder of my income will be W2. Thanks!

[@locumcpa]

Thank you for the great question! Here is the IRS link for reference to calculate: www.irs.gov/taxtopics/tc554 Thanks again for watching and supporting the channel!

[@beansonthecam4527]

Driving for uber/lyft sort of counts as a self-employment business. Would I combine both wages into one total income, and then include the total earned from both into the schedule SE, Schddule C and etc?

[@locumcpa]

Thank you for the great question. Yes, you should include all payments from Uber and Lyft when completing the Schedule SE and Schedule C.

[@kevinitman1694]

Quick question, on direct online payment for tax in IRS website, do we submit any form? or we must just pay the estimate?

[@Dolcedollie]

So if i work as a independent contractor for a direct selling company part time that states to issue a 1099 if one makes over 600 at the end of year i will have to estimate how much i owe 4 times during the year before i get that 1099 fyi i have a regular job that provides a w2

[@le4470]

Will you still get penalized if you make only 2 large estimated tax payments?? & do you have to follow the set schedule?? I'd like to make mine in July & end of December. Is that ok

[@studiosinger]

Actually the IRS is now using methods such as Square's system in how it records per monthly income on their 1099 to pay a penalty at the end of year even if you don't owe in your year end tax filing, except when you underpaid any particular quarter of what you earned. Additionally, it doesn't matter if you over pay your taxes at the end of the year, if one of the quarters was underpaid based on your tax bracket % you owed, you will be penalized with a fee and interest for underpaying that quarter and the IRS expects you to record it in the final year tax results.

[@bhcbhc]

Really! This whole thing is making me reconsider 1099

[@AbijitKour]

Thank you Steve! This video has been very helpful. I started working in the U.S. (Los Angeles) for the first time as an independent contractor starting Feb 23, 2018 and my first pay cheque came on April 4, 2018. I didn't make an estimated tax payment on April 15th because I saw in 1040-ES form page 1 under exception "You don't have to pay estimated tax for 2018 if you were a U.S. citizen or resident alien for all of 2017 and you had no tax liability for the full 12 month 2017 tax year." My husband is employed as well since March 2017 and we plan to file joint tax returns. I am still confused if I should have made an estimated tax payment in April or not. Should I make an estimated tax payment quarterly? If yes, what do I do about the missed first quarter payment? Thanks in advance.

[@locumcpa]

Thank you so much for the great question. I recommend still making quarterly estimated tax payments, as you will end up owing tax at the end of the year. You can always make a quarterly payment late or a catch up payment this upcoming Q2, June 15, 2018 payment deadline. Thank you so much for your support of the channel!

[@TherapistTamaraHill]

simpleetax I'm going to end up being late on my 6/15 payment. Will I get into any issues because of this? I wonder of I could paay online too?

[@locumcpa]

Hello Abijit! Thank you for the great question and support of the channel. In regards to your question, no need to make an estimated payment for Q1, April 15. However, for remainder of the year, I suggest making quarterly estimated tax payments (June 15, Sept 15, Jan 15) for your 1099 income.

[@locumcpa]

Hello Tamara! Thank you for the question. A late payment will incur a little bit of late interest dependent on the amount of taxes due. You can pay online, please use the following link for your Federal taxes: www.irs.gov/payments/direct-pay Have a great day!

[@TherapistTamaraHill]

That's awesome! I thought so but wasn't entirely sure. Thank you for this!

[@gremlinsbreath]

I need a little help here. I have been driving for doordash for less than a month. I have been an unpaid caregiver for my mother for the past two years which made me unemployed for that time. I have to start paying quarterly taxes but have no previous years information to go on. I previous years I had little to no deductions so I always used the EZ form or Turbotax to file. Any ideas?

[@locumcpa]

Thank you for the great question, apologies for the delayed response. For doordash, as a 1099 contractor, you should be paying quarterlies on the net income (Gross earnings minus business deductions like car mileage and fees taken out by doordash) you earn from the previous quarter. For example, if you worked for doordash September-December 2019, you should plan to submit a quarterly tax payment for such net income by January 15, 2020. For the 2019 tax filing season, you will not be filing a 1040-EZ but the standard Form 1040. Your doordash earnings and expenses should be reported on Schedule C of the Form 1040. Thank you for supporting the channel!

[@jarredl990]

@@locumcpa now I’m confused even more. I started shipt in November 2020 as a side job to my main w2 job. It’s January and I knew I’d have to figure out quarterly but I don’t understand how to estimate it and i don’t get why I need to fill out the 1040 standard and schedule c if now I have to fill out a 1099-nec. I’m lost and January 15 is closing in

[@Deleted__]

So since I’m making only $1000 a year, I won’t have to pay quarterly tax correct?

[@jjlockhART]

what if it's your first year - advice?

[@locumcpa]

@jjlockhART Thank you so much for the great questions. For your first year, I would def. recommend to first track all your income and expenses using a bookkeeping software like Quickbooks. For each quarter, base your quarterly estimated tax payments on your net profit (income minus business expenses) from that quarter.

[@jjlockhART]

THANK YOU!

[@noblelies]

Learn to hate the IRS 101

[@sammerkun95]

Can I still write off work related items on quarterly payments?

[@beansonthecam4527]

I didn’t receive any 1099 forms last year. I had all W2s. I Actually got a refund. Would that exempt me from underpay penalties since I technically did not owe taxes last year?

[@locumcpa]

Thank you for the great question! If you were in a refund position, then you should not be subject to any underpayment penalties. Thank you so much for the support!

[@itscolewilder]

Great video! I'm a photographer and started out full time last summer so I only spent about 6mo in business in 2017. How should I go about quarterly taxes being in my first full year in business? Should I do my first year in business with an annual payment instead of going right into quarterly? Thank you!

[@locumcpa]

Hi Cole! Thank you for watching and the support! Great question, I recommend paying quarterly vs. completing an outright annual payment. Thank you again for the question!

[@itscolewilder]

In that case how can I go about calculating an estimated payment being that it's my first year in business?

[@locumcpa]

Hi Cole! Please refer to the following link: www.irs.gov/pub/irs-pdf/f1040es.pdf

[@OscarGonzalez-yw4pp]

So if I started making money this year around this month all the way till the end of the year. would I have to file for quarterly taxes on 2019 January 15? Or before?

[@locumcpa]

Thank you Oscar for the question. In regards to quarterly taxes, I would submit your first tax payment before September 15 for income earned from July-August, and then a follow up payment on January 15, 2019 for income earned from September-December.

[@OscarGonzalez-yw4pp]

alright awesome, thank you.

[@loisvs781]

Will i be penalized for waiting to pay the full amount on January 15?

[@locumcpa]

Thank you Lois V for the great question. You may be penalized depending on when the income was earned during the year and if you did not submit a timely quarterly estimated tax payment. Thank you again for watching!

[@mrsemifixit]

Does this apply to federal only or state? Do we divide only previous years taxes owed to federal or state as well?

[@locumcpa]

Great question. This applies to Federal payments and some states. Please check your states tax rules.

[@willo5689]

I had both 1099 and W-2 income. How do I figure out how much W-2 withholdings to subtract from quarterly payments?

[@firstnamelastname4705]

willo5689 see a tax specialist at H&R Block.

[@trainrider110]

Question... how would it still work when it comes to the years end and I get my 1099s for Postmates/Uber/DoorDash/Caviar... if I had paid the IRS like lets say I file then with Turbo Tax but if I had already did the payments to them?

[@locumcpa]

Thank you for the question. If you already paid the IRS throughout the year via quarterly estimated tax payments, then the IRS will credit those payments against the total tax due. If you paid more than you needed to, you will receive a refund for the over payment. If you paid less, then you will owe.

[@MyrrandaAdams]

If our state does have an income tax rate where do we pay for that at? And should we be doing that one quarterly as well?

[@locumcpa]

Great question Myrranda. Each state should have an online payment system on their state site, most do have a quarterly payment requirement as well.

[@markjdube]

Question. If last year I worked different jobs and had both W2s and 1099s, while this year is solely self income doing a completely different job, can I still use the safe harbor method when paying my quarterly taxes for the year by paying what I owed from last year?

[@hoaryhair]

Mark Dube this is my question. I wish you would have received an answer!

[@locumcpa]

Apologies for the late reply, but yes, you can utilize last years safe harbor. Great question. Thank you for posting!

[@mileswatkins6472]

When you say 25-30 are you counting the 15% + income to get 30% could you break that down

[@donttread5414]

I understand that for estimated taxes for self-employed, you can pay 100% of your prior years taxes owed or 90% of the taxes you *estimate* you will owe for the current year. My 2019 taxes owed are about $25,000 USD, however they are almost zero because I was a non-resident and claim FTC's (Foreign Tax Credits) as I am a resident of Canada. After the FTC's my tax owed is only a few hundred dollars. Fast forward to 2020 I am now a resident of USA. I expect to owe $25k USD again in tax (with no FTC's). For my 2020 taxes, am I able to pay the 100% of my prior years taxes (few hundred $$$ in 2019) for my estimated taxes? Or are there rules against this?

[@locumcpa]

Thank you for the great question! In regards to 2020, I would highly recommend paying the total tax due via quarterly estimates instead of having a large tax bill due at year end. Based on your circumstance, you would fall under the safe harbor rule but I would still advise paying the estimated tax due via quarterlies. Thank you for watching and supporting the channel!

[@donttread5414]

@@locumcpa What is your reasoning behind recommending paying the quarterly taxes? I believe you may think I may not have the money to pay the large tax bill by Apr 15th? It does not make any sense to pay quartlery instalments which is optional when I can just pay 100% of my prior years taxes ($200) and keep the $25k in my bank account for another year and make interest on it.

[@locumcpa]

Thank you for your reply. It was only a suggestion as many people would rather pay incrementally than a large lump sum. You can choose however you would like to pay, either lump sum or incrementally. Have a wonderful day!

[@cascam1]

He's not talking about Employment Tax Due Dates which are: April 30, July 31, October 31, and January 31 (for the 4th qtr of the previous calendar year) Form 941, Employer's QUARTERLY Federal Tax Return.

[@beansonthecam4527]

I drive for uber. Do I include the total cost the “passenger” paid? Or do I just include profit (minus service fees, Uber fees).

[@locumcpa]

Thank you for the great question and service! You will include the total fee the passenger paid, then subtract from that payment all related fees (i.e. Uber fees) and costs (i.e. mileage, tolls) to determine your net profit which you will base your quarterly estimates on.

[@beansonthecam4527]

simpleetax for example let’s say total pay for passenger is 15 dollars. 5 dollars goes to uber for fees. 10 dollars goes to me. So, I’m guessing I would report the 10 dollars, which I received right? When it comes to the mileage I gather, would I deduct that in the estimated taxes form or would I do that at the end of the year with the schedule C?

[@locumcpa]

Thank you for the question. In your example, you would need to report the entire $15 and then deduct as eligible expense, the uber fees and the relevant mileage at the end of the year.

[@beansonthecam4527]

simpleetax it’s starting to make sense lol. So i wouldn’t deduct the Uber fees and the standard mileage deduction on the quarterly tax forms. I would do these deductions at the end of the year when I do my 1040 during tax time right?

[@christinacharles3283]

Unfortunately I am still confused for my case. Although I’m 23 I don’t have any knowledge in how taxes work. I get a W2 from my jobs but I was always supposed to give them to my mom and then I end up with a magical lump sum in my bank weeks later. I don’t know anything about my W2 or 1099 information since I do not hold onto them and I am still in the startup stage of my business. The only thing stopping me now is that I don’t know how to charge people tax and I am afraid to accept payments and then owe the government. I don’t want to do it wrong but I haven’t found any resources to give me understanding please someone help

[@locumcpa]

Thank you for the comment, much appreciated. Please check out my other videos to learn more taxes and what best to do in certain situations. Thank you for supporting the channel!

[@amaurysanchez3450]

Tax sensei

[@beansonthecam4527]

Do we have to pay estimated taxes for state as well?

[@locumcpa]

Thank you for the great question. The answer is Yes, if you live in a state that charges income tax.

[@beansonthecam4527]

simpleetax you are awesome. I really like your channel.

[@studiosinger]

Only if your estimated state tax at the end of the year doesn't qualify for estimated tax payments. For instance in California it's $500. If you don't anticipate owing more than $500 in California you can pay it at the end of the year without penalties according to my accountant.

[@UrAshWhole]

What if you just started and not earning any profits?

[@locumcpa]

Thank you for the question. If there are no profits, then no quarterlies need to be paid.

[@UrAshWhole]

@@locumcpa So pretty much until you start earning profit and expect to owe $1000+ of taxes, then you'll pay.

[@MaddenBomb]

How do you pay quarterly if I didn't receive a 1099 yet?

[@GiorgiMcd]

Ok

[@michelleapple1214]

I didn't make any money it was so little, now what. I'm so stressed out...ugh. I spent more then I made'

[@locumcpa]

Thank you for the question. If your business expenses exceed your business income, you should not have a tax liability. Thank you again for supporting the channel!

[@meme-tf8ih]

Please relax...U r not helping people who r not self employed...hence, retired, social security and on a state pension...how to calculate...