If you’ve taken the plunge into self-employment, congrats on being your own boss! Whether you’re working as a contractor or making money in the fast-growing sharing economy, don’t forget you may need to pay quarterly estimated taxes. The next quarterly estimated tax payment deadline for the 2020 tax year is coming up on January 15th, 2021.
Are you prepared? If not, don’t worry – we’ve got the info you need to know!
Who is Subject to Estimated Taxes?
In the United States, we have a “pay as you go” tax system. That means that the government expects to receive most of your taxes throughout the year. Because of this, employees have a certain amount of taxes automatically withheld from their paychecks.
On the other hand, if you are self-employed as a freelancer, contractor, or home-based entrepreneur, you most likely don’t have taxes withheld from your pay throughout the year and are instead subject to quarterly estimated taxes. In general, you are expected to pay estimated taxes if you expect to owe $1,000 or more annually for your taxes.
For your 2020 taxes, the final quarterly estimated tax deadline is coming up on January 15, 2021. Remember, you don’t have to make your 2020 4th quarter payment (January 15th) if you choose to file your full 2020 tax return by January 31, 2021, and pay the entire balance due with your return.
However, if you skip making a quarterly payment or pay late, you may be subject to a penalty. If you earn your self-employment income unevenly during the year, you may be able to use an annualized installment method at tax time and avoid a tax penalty for not paying estimated taxes every quarter due to fluctuating income.
When Are Estimated Taxes Due?
The final 2020 estimated tax payment deadline and the 2021 quarterly estimated tax deadlines are:
- 2020 4th Quarter (September 1 – December 31): January 15, 2021
- 2021 1st Quarter (January 1 – March 31): April 15, 2021
- 2021 2nd Quarter (April 1 – May 31): June15, 2021
- 2021 3rd Quarter (June 1 – August 31): September 15, 2021
- 2021 4th Quarter (September 1 – December 31): January 18, 2022
If the 15th falls on a weekend or a holiday, then the due date is the next weekday. Don’t forget that the final fourth-quarter payment deadline for your 2020 taxes is January 15, 2021.
*Note that if you are a victim of a recent federally declared disaster, there may be IRS tax filing and payment deadline extensions available to you. You can check for additional relief information on the IRS disaster relief page.
How Can I Figure Out My Estimated Taxes?
You can use QuickBooks Self-Employed to track your income, expenses, mileage, and figure out your estimated taxes year-round. The program does the math for you and helps you figure out your estimated taxes, so you can easily make the estimated tax deadline. At the end of the year, QuickBooks Self-Employed gives you the ability to export your Schedule C information from QuickBooks Self-Employed to TurboTax Self-Employed to make your annual tax filing easier.
When you prepare your taxes, TurboTax can also automatically calculate your estimated tax payments and print out payment vouchers for you to send to the IRS. You can also use TurboTax TaxCaster to get an estimate of your overall tax picture and if you should make an estimated tax payment. TurboTax TaxCaster has been updated to reflect the impacts of 2020 and coronavirus relief.
How Can I Pay Estimated Tax?
Now that you know what you owe, it’s time to get your payment in. Fortunately, you have several options:
- QuickBooks Self-Employed allows you to electronically file your quarterly estimated tax payments to the IRS. E-filing is fast and results in fewer errors because you won’t have to re-enter information into your checkbook or the IRS computer system.
- You can use the Electronic Federal Tax Payment System (EFTPS) to pay your estimated taxes. Besides making instant payments, it’s also free.
- You can mail in your payment. The IRS has specific mailing addresses based on the state where you live. Please be aware that your payments should be postmarked by the due date to avoid penalties.
Tips on Making Your Quarterly Tax Payments Easier
- Forget filling out handwritten forms: When you use QuickBooks Self-Employed for your business, the program will figure out your estimated taxes for you. TurboTax can also figure out and generate your estimated payment vouchers automatically when you prepare your taxes using TurboTax.
- Keep a record of all your estimated tax payments: You will need to enter estimated taxes you have paid when you file your taxes.
TurboTax Has You Covered
Don’t worry about knowing these tax rules. TurboTax will ask you simple questions about you and give you the tax deductions and credits you are eligible for based on your entries. If you are Self Employed, you can use QuickBooks Self-Employed to easily track your income, expenses, mileage, capture your receipts and estimate your quarterly taxes year-round. Your information can then be easily exported to TurboTax Self-Employed at tax-time.
If you have questions, you can connect live via a one-way video to a TurboTax Live CPA or tax expert with an average of 12 years of experience to get your tax questions answered. You can even connect virtually with a dedicated tax expert who will prepare and file your tax return in entirety with TurboTax Live Full Service. TurboTax Live CPAs and tax experts are available in Spanish and English, year-round and can even review, sign, and file your tax return.