Going into business — with a partner or on your own — can represent freedom from the priorities, timetables and demands of life as an employee. However, running a sole proprietorship or partnership comes with specific responsibilities. For one thing, if you expect to owe at least $1,000 in taxes, you must make quarterly estimated tax payments to the Internal Revenue Service.
Work through the first page of Internal Revenue Service Form 1040 to arrive at your estimated MAGI for the year. Estimate your current year income and use your previous year's return as a guide to deductions and credits. If your work and/or family circumstances have changed, you may not be eligible for the same deductions and credits you claimed on prior returns.
Download Form 1040-ES from the IRS website. You can also request the form by mail.
Work through the worksheet to discover your estimated taxes for the year. Use your expected MAGI figure, as well as your estimated deductions and credits. Line 14c represents the minimum annual payment to avoid a penalty.
Divide the Line 14c figure by 4 to arrive at the quarterly payment amount. Submit the quarterly payments by the deadlines, which fall on the 15th day of each of January, April, June and September. If the 15th of the month falls on a weekend, the payment is due the following Monday.
Items you will need
- Previous year's tax return
- Current year Form 1040
- If you have self-employment income, figure your self-employment tax deduction by working through the worksheet included on Form 1040-ES.
- If you expect that taxes will be withheld from pension or deferred income, for example, during the year, enter that estimated amount on Line 15 of the Estimated Tax Worksheet and deduct it from the figure on Line 14c. If the result is greater than $1,000, divide the result by 4 to arrive at your quarterly payment amount.
- Can I Claim My Child's Medical Expenses if He Is a Dependent on My Federal Tax Return When He Is 19?
- How to File Taxes When One's Child Receives Social Security Benefits
- How to Pay Quarterly Taxes If You Receive a 1099
- How to Prepay Taxes
- Are Unemployment Benefits Based on Previous Salary?
- How to Calculate IRS Late Charges