When you earn money throughout the year, and withholdings are not taken from your check, you are responsible for paying taxes to the IRS on your own. Your obligation is to make quarterly tax payments before the 15th day of the month following the end of the quarter. Instead of getting a check that already reflects your tax obligations, you must physically pay your taxes each quarter.
Your quarterly tax includes two types of payments:
- Self-employment taxes, representing the amount of Social Security and Medicare tax you owe (15.3% in total)
- Income taxes
Quarterly taxes are usually paid by self-employed people, freelancers, and small business owners who have receipts for their work and business. You only have an obligation to pay quarterly taxes if you expect to owe at least $1,000 in federal taxes.
It may be difficult for you to figure out how much you owe without doing a full-fledged tax return and knowing your income and deductions. However, you must do a “mini” tax return four times for each income tax year. This work can take away time from your business activities, so it is in your interest to get help with quarterly tax payments or at least some guidance from an experienced tax professional.
The extra challenge is that you could be penalized at the end of the year if you drastically underpay your federal income taxes. Many taxpayers use their prior year’s income as a guide for how much to pay at the end of each quarter.
Contact a San Francisco Tax Attorney Today
The attorneys at San Francisco Tax Counsel can work with you on tax strategies and the details of your tax returns. To speak with an attorney, you can message us online or call us today at 415.398.3990.