Everyone must pay taxes on the income they receive during the year, whether it is from a job, self-employment, or other sources. The IRS expects to receive tax payments as your income is earned, not just at the end of the year when you file a tax return. This is referred to as a “pay as you go” system.
While those who are employed will usually have taxes withheld from their paychecks and sent directly to the IRS, some people will need to make these tax payments on their own in the form of Estimated Tax
Who Must Pay Estimated Taxes?
There are several factors that can determine whether you need to pay quarterly estimated tax.
As a general rule, if your tax liability is $1,000 or more for the year, you are expected to make estimated tax payments. For instance, if you owed more than $1,000 in taxes when you filed your tax return last year, the IRS expects that you will either have more tax withheld from your paychecks or that you’ll make estimated tax payments the following year.
The following types of people are generally required to make estimated tax payments:
- Self-Employed Persons or Sole Proprietor Business Owners. Those who have income from their own business will need to make estimated tax payments if their tax liability is expected to be more than $1,000 for the year. This includes both part-time and full-time enterprises.
- Partners, Corporations, and S Corporation Shareholders. Business ownership earnings usually will require estimated tax payments. In the case of corporations, estimated tax payments must be made if the corporation is expected to have at least $500 in tax liability.
- People Who Owed Taxes for the Prior Year. If you owed taxes at the end of last year, it probably means that too little was withheld from your paychecks, or you had other income that increased your tax liability. This is a flag to the IRS that you should be making estimated tax payments.
To determine how much you have to pay for estimated tax, you must compile your income, deductions, credits, and paid taxes — much like filing a yearly tax return. Most people can look at their income/liability numbers from the previous year to gauge what they’ll owe the next year.Source: http://www.irs.com/articles/what-estimated-tax-and-who-does-it-apply
We Can Help You
At Tax Saving Professionals we are able to help both business owners and high net worth individuals cut taxes by 30-50 %. Before you make that next payment give me a call. If you are successful and making over $400,000 a year you owe it to yourself and your family. You can call me directly 772-646-6950 to set up a free consultation. I can show you a before and after look at what your taxes can look like this year and every year you are in business
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