What Are Estimated Taxes? | Ep. 219

• Estimated taxes are payments made throughout the year to cover anticipated tax liability for income that is not subject to withholding. This applies to business owners, contractors, and anyone whose income isn't withheld by an employer.

If you're a business owner, you're a contractor, anything that doesn't require that an employer withhold your taxes for you, that means you're responsible for your taxes yourself, then you may also be responsible for paying estimated taxes.

• You must make estimated tax payments if you expect to owe at least $1,000 in taxes after subtracting withholding and refundable credits. You may also be liable if withholding and credits are expected to be less than 90% of the current year's tax or 100% of the prior year's tax.

• Corporations (especially C corps, and sometimes S corps or LLCs) may also need to make estimated payments if they owe more than $1,000.

• Estimated tax payments are generally due on the 15th of the month following each quarter:

• Q1: April 15th
• Q2: June 15th
• Q3: September 15th
• Q4: January 15th

• If you don't make estimated payments, you may face penalties for underpayment of taxes. These penalties are in addition to any regular income tax liability and can add up quickly.

If you don't pay us throughout the year and you wait till the end of the year and you got more than a thousand dollars... then we're going to penalize you because you should have did this throughout the year.

• Use the IRS Estimated Tax Worksheet or a similar calculator from the IRS website. This accounts for your unique income, deductions, and credits. Avoid unverified online calculators.

I highly recommend sticking with what the IRS gives you because you never know if, let's say, you find an online calculator, if they updated it or keep it up to date.