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.
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.”
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.