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The IRS says that everyone who is self-employed has to pay quarterly taxes. Who is self-employed? You are, if you are a:
The reason for quarterly taxes is because as a self-employed person, you don't have an employer withholding income tax from your paychecks each week. Therefore, you are expected to make payments based on your estimated federal income tax. These taxes are typically referred to as quarterly taxes because they are due on a quarterly schedule:
How do you make quarterly payments to the IRS? Use Form 1040-ES, which can be obtained by calling 800-TAX-FORM or by downloading it from the IRS website at www.irs.gov. After the first year, the IRS will send these forms to you automatically. If you are using any of the widely used software programs (i.e., Intuit, Quicken, H&R Block ), all these forms can be printed from the program. How do you know how much to pay? The important thing to remember is that you want to avoid underpayment penalties. Here's the guideline to follow for making estimated quarterly taxes:
What if this is your first year in business? All first-timers should use last years ' tax return as a way to figure your estimated tax payments. Now that you have this all figured out, here's one more thing ”you will probably be expected to pay state taxes. State taxes follow the same quarterly payment schedule. |
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