As a 1099 contractor, the IRS requires quarterly (estimated) tax payments and the second payment of 2020 is due on Wednesday, July 15th. Now is your chance to square up with the IRS and avoid hundreds of dollars in penalties at the end of the year (in the time it takes to mix a breakfast smoothie!).
Pay close attention, because we're going to easily show you how to pay quarterly taxes. After you use our 1099 tax calculator, you might be surprised at how much you owe. Don't worry because quarterly tax payments will help you so you won't feel overwhelmed later. Taxes may not be the most exciting way to spend 15 minutes, but skipping means you’ll owe a big penalty at the end of the year.
The penalty includes both a cumulative monthly percentage, as well as a monthly interest rate. As a rule of thumb, it’s about 7% of the taxes you’ll owe at the end of the year.
💡Pro tip: the way the penalty works, every month you delay payment adds to the fee. If you missed the estimated tax payment deadline in April, you should double your payment in June to avoid six months of penalties.
Now that we’ve gotten the why out of the way, let’s talk about the how.
First thing you’ll want to do when you are filing estimate taxes is to use our quarterly taxes calculator to figure out how much you owe. This takes just a few minutes and requires only basic information like your rough monthly income and tax filing status.
💡 Pro tip: if you’re having trouble estimating your monthly self-employment income, don’t worry. It’s not critical to get it exactly right (hence estimated tax payments!) and the IRS gives you a 10% buffer in case you’re off. Also, it’s better to slightly overestimate than to under-estimate. At the end of the year, you’ll get that money back as a refund. That is why you need to file quarterly taxes. Here's what happens when you miss a payment.
Once you’ve input your numbers, press submit and you’ll get back exactly how much you should pay, along with links to making the payments online. As an added motivation, it also tells you exactly how much penalty you’ll be avoiding by making the payment!
Now, all that’s left is to make the payments online. For federal, click the “Pay online” button next to the corresponding amount, create an account and make a bank transfer. You can find step-by-step annotated instructions here.
If you’re lucky enough to live in an income-tax-free state, congratulations! You’re done.
For the rest of us, state payment portals are similar to how the federal payment works. You’ll create an account online, confirm your identity, and make the payment. Use the “Pay online” button next to your estimated to get started.
You did it! It’s not every day that you can avoid thousands in needless penalties in 15 minutes. Pat yourself on the back and go buy yourself a smoothie. You deserve it. Here are some more tips to help you get your taxes right in 2020.
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