How to Estimate IRS Taxes
Self-employed individuals and businesses pay taxes throughout the year to the Internal Revenue Service. These quarterly taxes are paid based on an estimated tax amount that is calculated four times per year, with the estimations designed to get as close to the actual tax liability as possible. This allows businesses and self-employed individuals to not have to owe any extra money when the tax-payment deadline comes around.
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Things You'll Need
- Profit and loss statement
- Receipts and income or other paperwork tracking your expenses, profits and income
Instructions
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1
Download form 1040-ES from the IRS website (see Resources).
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2
Input your estimated adjusted gross income for the year in Line 1. Enter either your itemized deduction estimate or your standard deduction in Line 2. Subtract your deductions from the adjusted gross income and input this result on Line 3.
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3
Multiply 3,650 by the amount of personal exemptions that you claim. If you aren't sure how many exemptions you can claim, consult the instructions for Form 1040-ES. Enter this amount on Line 4. Subtract your exemptions from the result on Line 3.
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4
Go to page 8 on Form 1040ES to get the tax tables. Calculate the tax you owe using these tables and input the result on Line 6. Enter any alternative minimum tax (AMT) you owe on Line 7. Use Form 6251 (see Resources) if you need to file AMT. Add the AMT and your estimated tax liability together and put this amount on Line 8.
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5
Put any credits available to you on Line 9. Subtract the credits from your tax liability and put this amount on Line 10. Calculate your self-employment tax, if applicable, and input this amount on Line 11. Add any other taxes you owe on Line 12. Add Lines 10 through 12 and put the result on Line 13a.
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6
Add your earned income, child tax, Making Work Pay tax credit and refundable credits to Line 13b. Subtract 13b from 13a and input the result on Line c. Multiply this amount by 0.9 and input the result on Line 14a. Put your tax liability from the previous year on Line 14b. Input the smaller of the amounts from Line 14a or b onto Line 14c.
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7
Enter your estimated income tax withholding on Line 15. Subtract Line 15 from 14c. Stop at Line 15 if the result is 0 or lower. Subtract Line 15 from 13c and stop if the amount is under 1,000. Multiply the result by 0.25 if you need to pay estimated tax and enter this amount on Line 17.
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