A common question people ask is, am I required to make quarterly estimated tax payments? I guess the best answer is: “sort of.” It’s not a matter of you “must,” but there are penalties for not doing so. The IRS will assess a penalty against you if you don’t make estimated payments and you owe […]
Self-employment tax is the bane of existence for many sole proprietors. And it’s often a surprise to people who are new to self-employment — they file their tax return and find out that things often turn out much differently when you’re self-employed.
When a taxpayer receives a refund of state income taxes, and the taxpayer took a deduction on their federal tax return, and some of the payments made to the state were estimated payments that may have been made in a different calendar year … well, it can require some math to determine the taxable refund and the deductible portion of the estimated payment.
A common question from business owners is, how and when do I calculate quarterly estimated tax payments?
Answer: this discussion goes beyond sole proprietors, and the short answer is “maybe.”
From the Archives: How to Allocate the Deduction for Federal Estimated Tax Payments on Your Iowa Tax Return
Iowa allows a deduction for federal income taxes paid, including estimated tax payments. The deduction for estimated payments is not straightforward if you’re filing your tax return as married filing separately.
Why make estimated tax payments? Because it helps the self-employed person avoid falling hopelessly behind on their tax liabilities.
Why make estimated tax payments?
This is part 2 of an explanation of estimated tax payments. In Part 1, I detailed the math behind the tax formula. In Part 2, I’ll explain why a taxpayer might want to make estimated tax payments. Here’s the reason: if you’re fully self-employed, you don’t draw a paycheck in the traditional sense. Since you […]
Why make estimated tax payments? An understanding of how the tax calculation works is a good starting point.