Calculating/paying quarterly estimated taxes can be done in a couple of ways. Here's how:
Estimate based on prior-year taxes: If your income stays about the same from year to year, you can estimate how much you'll owe for the whole year and then pay one-fourth of that amount each quarter. For example, if you expect to owe $10,000 for 2024, you'd send $2,500 to the IRS every quarter. This method is good for those with steady income or a clear idea of their earnings.
Annualize: If your income changes a lot, you can estimate your tax bill each quarter based on what you've earned so far in the year. This works better for people with varying income. You use your actual earnings and deductions for the year to predict your total tax bill. The IRS has helpful worksheets for this.
No matter which method you choose, you'll use IRS Form 1040-ES to show your income estimate and figure out your tax bill. IRS Publication 505 has all the rules and details you need to know. And if you're using tax software, it can make filling out the form and doing the math much easier.
Paying your estimated taxes is important, and there are different ways you can do it:
Your online IRS account: You can log in to your account on the IRS website and make your payment electronically.
The IRS2Go app: If you prefer to use your smartphone, you can download the IRS2Go app and make your payment through there.
IRS Direct Pay: This is an online service provided by the IRS that allows you to pay your taxes directly from your bank account.
The U.S. Treasury’s Electronic Federal Tax Payment System (EFTPS): This is another online payment system where you can schedule your payments in advance.
Debit or credit card: You can also pay your estimated taxes using a debit or credit card, but keep in mind that there may be additional fees for this option.
Cash payment: In some cases, you can pay your taxes in cash at certain IRS retail partners.
If you prefer to mail your payment, you can do so by sending a check along with IRS Form 1040-ES using a payment voucher. However, the IRS encourages taxpayers to use electronic methods of payment whenever possible for efficiency and security.
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