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How to estimate your quarterly taxes


Once you become self-employed, even if this means opening up a small business, you are going to be in charge of having to pay self-employment taxes. These taxes, which represent the Social Security tax that employers must withhold is paid in addition to any other taxes, state and federal income taxes that you might owe at the end of the year. Something else that you need to know is that most people who are self employed pay their self-employment taxes on a quarterly basis rather than just paying it in one lump sum at the end of the year. But what you have to do will depend on a variety of factors and you should consult with a tax professional before making any final decisions about when you pay your self-employment taxes. If you pay your taxes in one lump sum at the end of the year you will not have to worry about estimating your quarterly taxes because you are going to know exactly what you owe in self-employment taxes. But if you need to pay your taxes quarterly you are going to need to estimate your self-employment taxes for the entire year.

Difficulty rating: Moderately difficult to difficult

Step one:
The first thing that you are going to need to do is to figure out your self-employment wages for the entire year. The best way to do this is to use a tax return from a previous year, basically you are going to figure out that year's taxable income and then base your tax payments on that year's income.


Step two:
When filing your taxes you are going to need to file a Form 1040, a Schedule C or C-EZ and a Schedule SE. All of these forms are available from the IRS website for free for you to download.

Step three:
The first thing that you are going to need to do is to use the Schedule C or C-EZ to calculate your net taxable income from self-employment. Basically you are going to include your gross income throughout the year, deduct any business expenses that are allowed, and then arrive at your net taxable income for the year.

Step four:
One of the best ways to figure out your self-employment taxes that are going to be due at either the end of the year or if you are going to have to pay them quarterly is to figure out how much tax you are going to owe on a job by job basis and then save that money from each job. The best way to keep track of what you are going to owe is to figure out your self employment taxes and track the amount owed on a spreadsheet.

Step five:
Now you are ready to figure out the calculations based on your gross income, of course the amount you actually owe can change depending on what your net taxable income determines to be. The form that you are going to need to use to estimate your self-employment taxes that are due will be the Schedule SE.

Step six:
On line two of Schedule SE you are going to need to put your income for completing that job.

Step seven:
This same amount is going to also need to be shown on line three of the Schedule SE.

Step eight:
On line four you are going to need to multiply your income by 92.35 and report the amount on line four of the Schedule SE.

Step nine:
On line five you are going to want to multiply the amount on line four of the Schedule SE by 15.3 and report that amount on line five.

Step ten:
The amount reported on line five of the Schedule SE is what you are going to owe for the job or for the entire year, depending on how you are tracking your self employment taxes. If you are filing your taxes at the end of the year and are estimating what quarterly taxes you will need to pay the following year all you need to do is to divide the amount of self-employment taxes that you owe by four.

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