An old quote attributed to Benjamin Franklin goes, “In this world, nothing can be said to be certain, except death and taxes.” It’s true that taxes are an unavoidable part of life, and for anyone who doesn’t understand the process, taxes can also be overwhelming – especially when quarterly estimates come into play.
Luckily, with the right financial planning service in Des Moines IA, taxes – and quarterly estimates – don’t have to be a daunting endeavor. A certified accountant can help you navigate this process with ease, and remove some of the anxiety from the situation. But before you get started, do you need to pay quarterly estimates? Read on to find out.
Most of the time, anyone who is self-employed will be required to make quarterly estimated payments. This is because someone who is employed by a company is usually given a paycheck that already has federal, state, and city taxes taken out (called ‘withholding’). But those who are self-employed will need to pay that money to the proper entities themselves, since no one else is doing it for them.
People with a lot of untaxed income
If you’ve received a significant amount of money that is untaxed (for example, if you invest in a very profitable stock), you may need to make estimated payments. Here’s an easy way to think about it: do you owe more than $1,000 in taxes for the next filing deadline? If so, plan on making payments.
Contract employees are under the umbrella of those who are self-employed. In this scenario, individuals provide an agreed-upon service to a company, for which they are compensated, but are not hired on as full-time staff. This can be confusing for some people, as they are still paid like a salaried employee, receiving bi-weekly or monthly paychecks. A good way to tell if you need to make estimated payments is by looking at your employee agreement. If you filled out a 1099-MISC form, you are a contract employee, not a full-time employee, and thus must make quarterly estimated payments.
If you have a freelance business, you are also designated as self-employed by the IRS, and you’ll need to make federal, state, and city estimated payments each quarter. One example of a freelancer could be a web designer: they might offer their services to a variety of companies each year, and receive payment by the job. Then, they make payments based on their estimated income for the year each quarter.
If you are required to make estimated payments, be sure to send your checks on time each quarter. The IRS utilizes quarterly estimates from individuals across the state to finance its operations throughout the year – so if you pay everything at year’s end, you will be assessed a penalty. A capable and experienced financial planning service in Des Moines IA will help you get your paperwork and due dates in order, and guide you in your income and tax process year round. With the proper assistance, quarterly estimates do not have to be intimidating.