1040-ES: IRS Estimated Tax Form

Avoid IRS penalties! Learn how to file an IRS estimated tax form (1040-ES):

IRS estimated tax form

Alright! Your small business is getting off the ground and starting to make some money now. Along with that jubilant observation comes the sobering thought of paying taxes on that hard-earned income.

Impatient Uncle Sam doesn’t like waiting till April 15th for his money; so, self-employed workers have to pay tax in four specified payments on their estimated annual income. These payments are called estimated income taxes. They are used to pay your income tax and self-employment tax (Social Security and Medicare taxes).

IRS Estimated Tax Form Tips:

First of all, do you have to pay estimated taxes?

Well, if you own your own small business (sole proprietorship) and expect to owe at least $1000 in federal taxes, you are probably going to have to make some estimated tax payments.

There is an exception to that rule, however. If you didn’t have to pay any federal taxes last year because your business didn’t make a profit or you weren’t working, then you will not have to make any estimated tax payments this year no matter what you owe.

Be aware though that this special rule only applies if you were a U.S. citizen or resident for the entire year and your tax return for last year covered the whole 12 months.

Secondly, how do you figure your estimated tax payments?

First of all...dig out your most recent tax return. You are going to need it to estimate your regular income tax and your self-employment tax.

Here’s how to do it:

  1. Find your average tax rate by dividing your income tax (1040 line 43) by your adjusted gross income (1040 line 37).
  2. Add your average tax rate to the self-employment tax rate of 15.3%.
  3. Multiply this percentage by your quarterly net profit.

This figure is how much estimated tax you need to pay for that quarter.

Third...when do you send in your estimated tax payments?

Usually your first payment is due by that dreaded tax day....April 15th for income received January 1st to March 31st. If you didn’t make any money before March 31st, you don’t have to start making estimated tax payments until the ending of the quarter you actually earn income.

Here are the dues dates for your IRS estimated tax form and the time period they cover:

Income Received for the Period Estimated Tax Due Date
January 1 through March 31 April 15
April 1 through May 31 June 15
June 1 through August 31 September 15
September 1 through December 31 January 15 of next year

Finally, how do file your IRS estimated tax form?

You will need to file your federal estimated taxes by using IRS estimated tax form 1040-ES. This form includes four numbered payment vouchers to send in with your payment and also instructions on how to fill out the IRS estimated tax form and where to send.

Once you have made your first payment, the IRS will kindly send you preprinted vouchers to start using.

Note: Don’t forget to make state estimated taxes also…unless you live in one of the states that don’t have income taxes. 

Tips:

  • Make your check payable to "United States Treasury" and be sure to put “ 20XX Form 1040-ES” and your Social Security Number on your check or money order.
  • Enter the amount owed on the right side of your check like this: $000.00 without any dashes or lines.
  • Enclose, but do not staple or attach, your payment with the estimated tax payment voucher.
  • Make copies of everything before you send in your payments and file for future reference in filing your annual tax return.
  • Check into making your estimated tax payments via the Electronic Federal Tax Payment System, or EFTPS.
  • Try making monthly payments. With EFTPS, you can set up recurring monthly payments that are smaller and more manageable than quarterly payments.
  • Avoid penalties for underpaying your estimated taxes. Figure as close as you can and make your estimated tax payments in timely manner.




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