How To Estimate Federal Taxes
Learning how to estimate federal taxes can save you from penalties. Everyone that’s self employed should learn how to estimate federal taxes so that they can pay the proper amount of taxes each quarter. While the process may sound difficult, the IRS actually makes it quite simple for taxpayers to estimate federal taxes.
Things You’ll Need:
- Form 1040-ES
Previous tax returns
- Determine how much money will be made during the tax year. Looking back on previous tax years, or even looking at recent earnings, can help you better determine how much money you can expect to make. For example, if your earnings have increased by a certain percentage each tax year, there’s a good chance this trend will continue and you should do the calculations to figure out how much that will mean for the current tax year.
- Print Form 1040-ES from the IRS website. There are several factors that determine how much federal tax will be owed. Form 1040-ES makes it easy to go through these factors and come up with the best estimate possible.
- Fill out the form completely. In order to complete this step, you may need to look at previous tax returns to help you determine how you’ve filed your tax returns in the past. You’ll also need the estimate of how much money you plan to make in the current tax year as well as a calculator to do all the calculations. At the end of the form, you will be provided with an estimate of the federal taxes to be paid as well as what you need to pay quarterly.
- The first estimated federal tax payment is due April 15, unless that date falls on a weekend or holiday.
Estimated federal tax payments must be made if you will owe more than $1,000 in taxes for the year.
- Failing to pay estimated federal taxes can result in penalties for late tax payments.