Don't Forget to Pay Your Estimated Taxes

It’s been a busy year and I’m happy to report that I’m picking up more business. Since I like to keep an eye on my finances, I try to stay on top of all my obligations. Using a monthly budget I pay my business expenses on time and quarterly I examine my finances to pay my estimated taxes by September 15.

I’m not alone – if you are an independent contractor or have additional income besides your job, you may have to pay as well.

What are estimated taxes? Do you need to file? If so, how do you pay them and when are they due? Let’s go over some of the main points estimated taxes.

What are Estimated Taxes?

In the United States we have a “pay as you go” tax system. While taxes are due each April, the government expects most of your taxes throughout the year. Employees at work have a certain amount automatically withheld from their check.

For those self-employed, though, they have to submit their tax payments themselves. Estimated taxes cover your income tax as well as Social Security and Medicare.

When are Estimated Taxes Due?

Estimated taxes are due on a quarterly basis. Here are the upcoming due dates for the next year.

• 4th quarter taxes are due January 15, 2011
• 1st quarter taxes are due in April, 2011
• 2nd quarter taxes are due June 15, 2011
• 3rd quarter taxes are due September 15, 2011

Mark your calendars and set up reminders to prepare and calculate your estimated taxes. Use form 1040ES for your payments.

Paying Your Estimated Taxes

You have options on how to pay your estimated tax bill. Use one that is comfortable for you. If you decide to mail in your payment, the IRS location your send it to is based on the state you reside in. The IRS has a complete list for you to use when you mail it in. Please be aware that your payments should be postmarked by the due date to avoid penalties.

You can also pay your taxes online with Electronic Federal Tax Payment System(EFTPS). Besides making instant payments, it’s also free. you do have to enroll so it would be too late for this quarter. Signing up for the program is easy:

• Go to EFTPS site
• Have your Taxpayer Identification Number ready
• Have  you bank account information handy (routing/account numbers)
• A copy of your tax documents – Your name has to match it exactly when you enroll.
• Select which enrollment you need to complete – You can choose individual or business.
• Submit all the information as requested.

You should received confirmation in the mail approximately 10-15 after enrolling. You will receive your PIN in a separate mailing. You need the PIN to log in and make payments. Once you’re enrolled it’s quick and easy to make the payments.

Your Take

Have you paid your estimated taxes?