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Self-Employed? First Quarter Estimated Tax Payment Deadline is April 18 – GOBankingRates

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For those unaware, April 18 is the deadline for filing 2021 tax returns. For some taxpayers, it is also the date when their first estimated quarterly tax payment is due.

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Estimated quarterly tax payments are “pay-as-you-go” installments made throughout the year on income that hasn’t had withholdings taken by an employer. Most commonly, this is the case concerning income earned by the self-employed.

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Anyone who earns income must pay most of their income tax during the year as the income is earned. For many workers, this happens automatically through withholding by your employer. You do not need to pay estimated quarterly tax payments if “you were a U.S. citizen or resident alien for all of 2021 and you had no tax liability for the full 12-month 2021 tax year,” per the IRS.

The self-employed — and business owners — who earn income that is not subject to withholding, however, will need to estimate their tax liability. This is done through payments made throughout the year rather than paying it all in full at year-end. Estimated quarterly taxpayers include self-employed individuals, landlords, independent contractors, investors and people who earn royalties.

Generally, you will need to pay estimated quarterly tax payments if you meet both of the following two requirements:

  • You expect a tax liability of greater than $1,000 ($500 for corporations) after any withholding and refundable credits.
  • You expect federal withholding and refundable credits to be less than the smaller of 90% of your current year’s tax liability or 100% of your prior year’s tax liability.

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Those who see earnings withheld by employers but have additional income (i.e.: rental property income, divided income) may need to pay quarterly estimates to cover tax liabilities not covered by earnings withheld. Others, who have opted to not have voluntary withholding, should make estimated tax payments on other taxable income, like unemployment compensation and the taxable part of your Social Security benefits.

To calculate your federal quarterly estimated tax payments, you must estimate your adjusted gross income, taxable income, taxes, deductions and credits for the calendar year 2022. The IRS Form 1040-ES includes an Estimated Tax Worksheet to help you calculate your federal estimated tax payments.

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Source: https://www.gobankingrates.com/taxes/filing/self-employed-first-quarter-estimated-tax-payment-deadline-april-18/

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