• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Facebook
  • Instagram
  • LinkedIn
  • Twitter
  • YouTube
Big Ideas for Small Business logo

Barbara Weltman

Big Ideas for Small Business, Inc.

Whitepaper download

Subscribe and download our eBook, "150+ Tax Deductions for Small Business A to Z."

This field is hidden when viewing the form
Get the:

  • Home
  • About Us
  • Big Ideas For Your Business
    • Idea Of The Day ®
    • SMB Legal
    • SMB Taxes
    • SMB Financial
    • Small Business
    • Newsletter Archive
  • Services
  • Books
  • Blog
  • Multimedia
    • Videos
    • Radio Shows/Podcasts
  • Be a Guest Blogger

How to Figure Your Estimated Taxes

March 26, 2015 / By Barbara Weltman

Follow @BarbaraWeltman

http://www.dreamstime.com/royalty-free-stock-photography-hand-writing-time-taxes-hands-marker-face-clock-image36872907If you’re self-employed, there’s no tax withholding from your business earnings you can use to meet your tax obligation. Instead, you pay estimated taxes in four installments.

There are two main challenges with respect to estimated taxes:

  1. Figuring out how much to pay (so you don’t overpay and have to wait for a refund or underpay which can result in penalties); and
  2. Having enough cash available to make your installments.

Here are some strategies to help you address these challenges.

Rely on what you paid last year

Past is prologue for estimated taxes because relying on the past can (1) give you a good idea of how much to pay and (2) avoid estimated tax underpayments even if you fall short. Under one safe harbor from estimated tax penalties, as long as your estimated taxes for this year are at least 100% of your prior year tax liability (or 110% if your adjusted gross income in the prior year was at least $150,000, or $75,000 if married filing separately), there’s no underpayment penalty.

In order to use this penalty safe harbor, you need to know what your tax liability for last year actually is. This can be troublesome if your income fluctuates and you obtain a filing extension for your income tax return.  For example, your first estimated tax payment for 2015 is due April 15, 2015, but if you have a filing extension for 2014 income tax return, you won’t know the final tax bill for 2014 on which to figure estimated taxes under this penalty safe harbor.

Project your bill for this year

A better way to make more accurate estimated tax payments (so you won’t overpay and have to wait for a tax refund or underpay so you have to come up with more cash at tax time) is to figure what you think you’ll actually owe this year. This can be done with the help of your tax advisor or using an IRS worksheet. Your estimate doesn’t have to be perfect; under a second safe harbor, as long as your estimate is 90% of the final tax bill, there won’t be any estimated tax penalty.

Set money aside for payments

One of the biggest challenges for many self-employed individuals is having the cash on hand to pay the estimated tax installment on time. This cash flow concern can be remedied by disciplined savings.

But how much do you need to save in light of the uneven time periods for the four estimated tax installments (April 15, June 15, September 15, and January 15 of next year)? A handy free tool that you can use to figure how much you need to save weekly so you’ll have your targeted payment on the installment due date is DynaTax’s calculator. Of course, it’s up to you to implement a savings plan for your targeted payment.

Conclusion

Estimated taxes are a fact of life for self-employed individuals. There may be alternatives for certain people (e.g., those with a working spouse who can use his/her withholding to cover the couple’s tax bill; sideliners who can use withholding from a job). But most self-employed individuals should plan for estimated taxes. Work with a tax advisor to get a handle on this tax responsibility.

Tweet This

Tags estimated tax payments estimated taxes self-employed Taxes

Primary Sidebar

Categories

  • General Business (506)
  • Guest Blog (114)
  • Homepage (27)
  • Small Business (1,007)
  • SMB Financial (330)
  • SMB Legal (67)
  • SMB Taxes (327)

Barbara’s Recent Posts

  • Is Christmas in July for Your Small Business? July 10, 2025
  • How to Streamline Recruitment and Selection to Enhance Hiring Results July 9, 2025
  • One Big Beautiful Bill: Checklist of Tax Changes for Small Businesses July 8, 2025
  • What the U.S. Supreme Court Told Small Businesses in This Term: Part 1 July 3, 2025
  • Mid-Year Business Planning for 2025 July 1, 2025
  • 10 Ideas for Coping with Cash Flow Challenges June 26, 2025
  • 5 Insurance Traps to Avoid June 24, 2025
  • Creating a Feng Shui Office Layout for Your Business June 20, 2025
  • Scaling Your Business by Optimizing Social Media Marketing June 19, 2025
  • The Timeless Value of Business Cards in a Digital World June 18, 2025
  • What Does the Latest IRS Data Book Tell Us? June 17, 2025
  • Business Advice from Famous Dads June 12, 2025
Awarded Top 100 Small Business Blog medal (link will open in a new window or tab)
Marquis Who's Who 2023 Badge
Top Small Business Blogs (Link will open in a new window or tab.)
8 Financial blogs small business Owners Need to Read. Invoice home.  (link will open in a new window or tab)
Best Small Business Blog, Expertido.org
Top 50 Small Business Blogs 2018
Best Small Business Blogs
BizHumm Top 100 Business Blog Award to Barbara Weltman
FitsSmallBusiness.com: Award for Best Small Business Blog 2017 (link will open in a new window or tab)
FitsSmallBusiness.com: Award for Best Small Business Blog 2016 (link will open in a new window or tab)

Footer

Big Ideas for Small Business logo

Small business ideas, business tax news and small business consulting from Barbara Weltman to provide business owners with the information they need to succeed. Visit our small business blog, Idea of The Day®, small business books and articles on small business taxes, small business finance and small business legal advice.

Contact Us

[email protected]

(772) 492-9593

gacor maxwin situs slot thailand terpercaya situs slot gacor situs gacor akun pro thailand slot bandar togel terpercaya

Latest Tweets

bigideas4sb Big Ideas for Small Business® @bigideas4sb ·
July 10

5 Best Apps to Help You Delegate Tasks Easily - LifeHack https://bit.ly/4ktlMs8 #smallbusiness #delegate #workplace

Reply on Twitter 1943438117886726437 Retweet on Twitter 1943438117886726437 Like on Twitter 1943438117886726437 1 Twitter 1943438117886726437
bigideas4sb Big Ideas for Small Business® @bigideas4sb ·
July 10

Motivation vs Discipline: Why One Always Beats the Other (And It's Not What You Think) - LifeHack https://bit.ly/4eCTSIQ #productivity #smallbusiness #motivation

Reply on Twitter 1943384967964229673 Retweet on Twitter 1943384967964229673 Like on Twitter 1943384967964229673 Twitter 1943384967964229673
bigideas4sb Big Ideas for Small Business® @bigideas4sb ·
July 10

Use These 11 Guidelines to Decide When to Bend the Rules for Employees https://bit.ly/3GEPOeH #workplace #smallbusiness

Reply on Twitter 1943360134333276317 Retweet on Twitter 1943360134333276317 Like on Twitter 1943360134333276317 Twitter 1943360134333276317
Load More

Copyright © 2008–2025 Big Ideas for Small Business, Inc  |  Designed by Hudson Fusion

  • Privacy Policy
  • Sitemap