So, in order to estimate tax payments for next year, Turbotax wants me to tell it how much I’m going to make next year. That’s all well and good, except that I have no idea. All my income is freelance 1099-Misc income, and it is by no means steady.
Is there some formula that will help me estimate quarterly tax payments on a per-check-received basis?
Example: So far this year I’ve rec’d Freelance checks of $120, $250, $300, $900. How much do I set aside for taxes? My goal is to avoid a nasty shock next April.
Hi, haven’t had my first job yet, don’t know anything about taxes, sorry, just checking in to let you know that thanks to your Dopername I have that “Hello Again” song from the TV Land commercials stuck in my head. I don’t mind, as it’s a somewhat fun and trippy song.
Well, first off, if you’re solely freelance, you should be making quarterly estimated tax payments, rather than just one in April.
I don’t know how you would make TurboTax behave, but I just take 30% off the top of each check and chuck it into my “Uncle Sam” savings account. Each quarterly payment comes out of that. With expenses, deductions, etc., it usually comes out to about 20%; I use the remainder to pay property taxes, the tax preparer, etc. I will also occasionally “pay myself” out of that fund against future checks, if it’s not too close to the end of the quarter. (Example: There’s $2000 in the account, to be used for taxes. I have a check for $1000 due, but I’d like to spend it now. I take $700 [my share of the future check] out of the tax account, and when the check arrives, I deposit the whole thing [the $700 I borrowed, plus the $300 tax share] back into the account, and I’m all square.)
Also, every quarter you are square with Uncle Sam as long as you pay, I think, 90% of what you paid in last year at the same time. Stiffs you, of course, if you end up making less than last year, but saves you the trouble of doing the estimate each quarter.
I expect I’ll make around 50% of what I did last year… I don’t mind being a little “ahead” but 90% of last year’s taxes is going to b prohibitive.
I knew about quarterly payments, I just phrased my OP stupidly. Thanks for the advice so far though. Lopping 28% off of everything what a route I have considered.