Estimated Tax Course now available as part of the Simple Profit Membership!
The tutorial is pre-recorded videos with support to ask questions when you have them!
The tutorial takes approximately one hour to complete. Revisit the videos as many times as you need to as long as you are a member!
All videos have closed captioning.
Estimate your taxes
Let's demystify the process of estimating your estimated taxes!
- Understand IRS tax rules.
- Learn how to read your tax return and determine how much you historically owe in income and self-employment tax.
- Calculate an estimated tax amount to ensure you do not incur an underpayment penalty.
- Use a customizable spreadsheet to determine your tax payment options.
- Tips for paying estimated state income tax.
Note: Texas and Oklahoma have until June 15, 2021 for the first payment.
Who needs to pay estimated taxes?
Estimated taxes are due if you expect to owe over $1,000 in tax that won't be withheld from a paycheck. This means most self-employed individuals and partnerships will need to pay estimated taxes.
It's my first year in business, do I need to pay?
Possibly. The IRS does not give taxpayers a pass on paying estimated tax just because it is their first year in business. However, if you did not have any business, job or other income in the prior year, you may not need to pay estimated tax. If you traded a W2 job for a self-employed business, the IRS may expect you pay in at least as much as you paid last year if your income will be as high or higher. However, you may not have any tax due if you made very little and if your income is lower you can pay a lower amount in estimated tax.
Look at your prior year tax filing and see if the total tax line is $0, not the refund or amount owed, but the total tax line. If total tax is $0, you do not have to pay estimated taxes this year. However, you may still get a large tax bill and so you are encouraged to save and/or pay estimates EVEN IF not required.
Who does not need to pay estimates?
Tax payers who have sufficient taxes withheld via a W2 paycheck do not need to pay tax estimates. Individuals who expect to owe less than $1,000 in income tax also do not need to pay estimated tax.
Jennie Schottmiller, CPA
Jennie Schottmiller is a CPA as well as licensed marriage and family therapist in Pennsylvania. She has an active solo therapy practice and runs several facebook groups and a website to help small business owners understand accounting, tax and financial analysis matters. Jennie fills in the gap between what business owners need to know and what accountants typically share.Learn about coaching with Simple Profit