Do You Have To Pay Your Taxes Quarterly As An Independent Contractor?

Do You Have To Pay Your Taxes Quarterly As An Independent Contractor?

Are you new to the exciting world of being a freelancer – or independent contractor? You probably have a lot of questions about finances, mostly about your taxes. Doing taxes as an independent contractor as opposed to a full-time salaried or hourly employee is pretty different. One of the most popular questions asked is whether your not you have to pay your taxes, which are called your estimated taxes, quarterly.

Paying Quarterly Taxes

You are required to make estimated tax payments for the current tax year if you are going to owe at least $1,000 in taxes after subtracting your refundable credits and withholdings.

However, you do not have to pay each quarter. While it’s better to do this to ensure you’re paying enough in taxes, you can make one or two large payments throughout the year. If you make quarterly payments but had to skip a month, be sure to make the extra payment the following quarter.

Not paying enough in taxes results in a penalty for underpayment. Play it safe and make your payments each quarter.

What Are Quarterly Taxes?

Quarterly tax payments are calculated when you take the amount you made on your previous tax return and divide it by four. Those are your estimated monthly payments for each quarter. If you end up overpaying because you didn’t make as much that year or you wanted to pay a little more because you’re expecting to make more, you will get that back as a refund when you file your taxes.

Don’t know how much you will make each payment? The rule of thumb is to take 25% out of your paycheck for taxes. For example, if your check is $458, you should put aside about $114.50 for your taxes.

How Do I Make A Payment?

Visit the IRS website for the 1048-ES, Estimated Tax for Individuals form. Follow the instructions to make your quarterly payments, which you can either pay online or by phone. It helps to track your payments closely and save any records of receipts for payments in case you need to refer to them in the future.

Get Expert Advice With Denver Tax Advisor

A great tax advisor should be able to answer your tax-related questions in a friendly and stress-free environment. Whether you need assistance filling out a form, figuring your estimated taxes, or discussing what’s considered a write-off, a tax advisor can help you navigate complex situations. Visit https://denvertaxadvisor.com/ for your answers, as well as helpful tips about your estimated taxes.

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