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PAYING ESTIMATES TAXES

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Working for yourself? You need to fill out the 1040 ES

If you're self-employed, have freelance income or any sort of income where taxes weren't withheld, then YES you need to file the 1040 ES, or the IRS estimated tax payment form, every quarter!

Image displaying Form 1040-ES with text explaining estimated tax payments for self-employed, freelancers, and gig workers.

Since your employer is no longer withholding your income taxes, you are now required to handle this on your own by making estimated tax payments each quarter. Instead of paying an annual tax return, you now must file your taxes more frequently, each quarter, or roughly every 3 months. This can be completely new and confusing. There are now many deadlines to keep track of and new information to learn in order to avoid any penalties. Unlike the Form 1040, the 1040-ES (ES meaning estimated taxes) is filed more than once and year, and is part of the process of paying quarterly taxes. Read along to learn how estimated taxes work, determine if you do need to file 1040-ES and ensure you understand the ES-1040 form.

Table of contents

What is the 1040 ES form?...Read more

Who should file the IRS form 1040-ES?...Read more

What exactly are estimated taxes, anyway?...Read more

What are the criteria to pay estimated taxes?...Read more

How to calculate estimated taxes...Read more

Can estimated taxes be avoided?...Read more

How to file a 1040ES...Read more

Due dates for estimated taxes...Read more

Where to get the latest 1040 ES form?...Read more

What is the 1040 ES form?

In order to report your quarterly income tax payments, you will need to use the IRS 1040-ES, the ES meaning estimated taxes. This estimated tax form is used simultaneously with the Form 1040. Form 1040 reports your income tax for the year, whereas the 1040-ES form separates your taxes into quarterly payments. The 1040-ES makes it easy to calculate the estimated amount of tax liability that you will owe for the year. If you do not have withholdings taken from your paycheck by an employer, this form will be needed to make sure you pay the correct amount of taxes, which includes federal taxes, state taxes and social security taxes.

Who should file the IRS form 1040-ES?

You may be wondering: do I need to file 1040-ES? As someone who is self-employed or a freelancer, you do not have taxes deducted from your income. This means you are required to fill out the tax form. Additionally, if you receive other types of income that are not taxed at the source, then you must fill out the 1040-ES. Here are some examples of income that is not taxed at the source:

Image listing types of income not taxed at source including dividends, rent, Social Security benefits, interest earnings, retirement benefits, and taxable unemployment compensation. No mention of self-employed, 1099, freelancer, or taxes.

If you receive any income from the above list, then you must fill out the estimated tax form.

What exactly are estimated taxes, anyway?

Estimated taxes are paid each quarter to the IRS by any sole proprietor, LLC, or S corporation that is not subject to withholding taxes. A sole proprietor is someone who does not own a business that is incorporated, like an LLC or S-Corp. For example, people who own their own catering business, tutoring service, landscaping business or house cleaning service that is not incorporated as legal entity are all sole proprietors. Typically, if you receive a paycheck from your employer, your taxes are withheld from your paycheck. Since you are self-employed, it’s now your job to estimate how much you will owe in taxes and pay them yourself. The ES form applies only to those who expect to pay more than $1,000 in income tax for the year. The form is organized into four separate sections, with one section per payment period, called the IRS quarterly payment form. Every quarter, you will make an estimate based on the previous year’s income. Then you will send the payments based on your estimate to the IRS as a percentage of earnings that quarter. This is sent in addition to the IRS estimated tax payment form. When sending a payment to the IRS, you must send one of the separate sections of the ES form.

What are the criteria to pay estimated taxes?

There are two options for calculating your quarterly estimated taxes.

Alt text: Guidelines for paying estimated quarterly taxes - pay 100% of last year's tax liability or 90% of current year's tax owed to avoid penalties. Relevant for self-employed, 1099, and freelance workers.

You can use the IRS 1040-ES form and the 1040 ES online payment system to help you pay your taxes.

How to calculate estimated taxes

Since you are making an estimation, you may underestimate your tax payment. Using your previous year’s taxes as a guide can help you avoid any penalties. Remember, you will not be subject to the penalty if you pay 100% of last year’s taxes. If you overestimate your payment, you will be eligible for a refund at the end of the year. And everyone loves an IRS refund! Follow these instructions to help you calculate your estimated tax payment.

Alt text: Steps for estimating quarterly taxes for self-employed individuals or freelancers. Calculate taxable income, deductions, income tax, self-employment tax, and divide by 4.

Now you will have your estimated quarterly taxes for each quarter. Next, add this information on your IRS quarterly tax payment form. Be sure to follow these 1040-ES instructions to calculate an accurate tax payment.

Can estimated taxes be avoided?

There are some instances that make it possible to avoid paying estimated taxes and filling out the IRS quarterly payment form. For example, after applying your federal income tax withholding, you may expect to owe less than $1,000 in income this year. Or, suppose you receive a typical salary from your employer and withhold enough taxes on your pay. Both cases would result in avoiding paying estimated taxes. Let’s say that your income increases drastically, and suddenly you’re rich. You came into this money by selling stock for a massive profit or getting lucky with a winning lottery ticket. These are the only exceptions. You may decide to start a side business (using Schedule C, you report your income from that business), while continuing to work for an employer who is withholding taxes from your paycheck. Due to starting your business, you may be able to increase your withholding to equal the amount of your tax liability for the entire year. In this case, having a side business would not require you to pay estimated taxes. If you are retired, you may not be required to pay the quarterly taxes. If you have enough taxes withheld from required distributions from IRAs at year-end to cover your tax bill, then you do not need to pay quarterly taxes. Another exception is if you are receiving your Social Security income, you can choose to have your federal income taxes withheld. These are all prime examples of when it’s possible to avoid paying estimated taxes.

How to file a 1040ES

First you need to either download the printable 1040 estimated tax form on the IRS website and fill it out manually, or you can fill out the form digitally directly on the IRS' website. Make sure you also use the Estimated Tax Worksheet to help calculate and enter your estimated income and expenses. Unlike filing the Form 1040, there is no need to submit the actual 1040-ES form. Instead, you can pay 1040-ES online at the IRS' website using the Electronic Federal Tax Payment System (EFTPS).

You can also mail a check or a money order made payable to the IRS, but snail mail is never the preferred method of payment.

Due dates for estimated taxes

The name suggests that the taxes are paid in quarterly installments. So ideally you would make a 1040 ES payment every three months. But of course, the IRS never seems to make anything simple! Let’s take a look at the breakdown of the filing payment deadline. The first three months of the year cover the first quarter, January 1 to March 31. However, the second “quarter” only covers two months, April 1 to May 31. Again, the third month is three months, June 1 to August 31, and the fourth quarter includes the final four months of the year.

Alt text: "Important dates for estimated tax payments for the year 2022-23. Relevant for self-employed, 1099, and freelancers to keep track of taxes."

The tax installment payments for 1040-ES 2022 are usually due on April 15, June 15 and September of the current year. Again, a 1040 ES payment is due on January 15 of the following year. However, you are eligible to skip the final installment if you file a tax return and pay all the taxes owed by February 1. Finally, some good news! A 1040 ES payment is only due when you have the income for which the estimated taxes are due. However, if you know that you will make estimated payments early on, then each of your four payments should total 25% of the total amount due.

Where to get the latest 1040 ES form?

You can find the printable 1040 estimated tax form on the IRS website. Be sure to check that you print the correct form, the 1040-ES 2022 form.

Image shows a payment voucher for 2022 Estimated Tax by Department of Treasury, IRS. Pay by check or money order. Do not send cash.

1099 G form

The 1099-G form is used to report payments made by governments to individuals. Unemployment compensation should be reported on Schedule 1 (Form 1040).