March 4th, 2012
Quarterly Taxes for Beginners
By Paula Pant
By Paula Pant from Afford Anything
New to the world of freelance writing? You might be surprised to learn that you have an added responsibility to Uncle Sam: many freelancers need to file taxes every quarter.
Traditional employees have taxes automatically withheld from their paycheck. As a freelancer, however, taxes are not withheld from the checks that your clients send you.
The government won’t let you get away with deferring your taxes for a year. You’ll need to pay estimated taxes quarterly. Here’s a brief explanation of how to do it:
Step 1: Look at your most recent tax form. Find your total tax and your withholding. On a 1040 form, this would be written on lines 62 and 63.
Step 2: Subtract your total tax from your withholding. The result is your liability.
Step 3: Divide your liability by 4. The result is your estimated quarterly liability.
Step 4: Mail your estimated quarterly tax to the IRS by the four deadlines: January 15, April 15, June 15 and September 15. Include Form 1040-ES, which helps the IRS process your payment.
I’m simplifying this explanation for the sake of giving new freelancers a very quick overview of the general process. Your experience might be much more involved.
For example, you may need to make adjustments if your tax liability is significantly different than it was last year. This may happen if your income this year is dramatically higher or lower than it was the previous year. It can also happen if you qualify for different deductions.
In this case, consider calculating your estimated taxes based on this (current) year’s income. Here are a few longer articles explaining how to do this:
Want to have a little laugh about your taxes? Check out this article from SPJ’s Independent Journalist blog archives, Funny Taxes for Freelancers.
Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as tax advice and/or legal advice. While I have made every effort to include accurate and complete information, I cannot make any guarentees, and laws and codes change frequently. Always consult with a tax professional and legal professional.