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Important Tax Rules For The Self Employed: Payments Are Coming Due!

By Craig Ford 7 Comments - The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited November 17, 2023.

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The IRS defines a self employed person as one who:

  • Carries on a trade or business as a sole proprietor
  • Is an independent contractor
  • Is a member of a partnership, or
  • Is in business for yourself in any other way

General Tax Considerations For The Self Employed

If you earned $400 as a self employed individual, you are required to file a tax return using a Schedule SE.

How to Calculate Estimated Tax:

Visit the IRS website at www.irs.gov and get the Form 1040-ES worksheet.  This worksheet will help you calculate your estimated taxes.

When you pay your estimated taxes you must pay either 100% of your previous tax return or 90% of your 2009 taxes owed.  If you miscalculate you could be assessed a fee by the IRS.

You must make your payments according to the IRS schedule.  Payment due dates are as follows:

April 15th, 2010

June 15th, 2010

September 15th, 2010

January 17th, 2011

How To Plan/Budget For Estimated Taxes

Once you have calculated your payment amount due, each month when you take your salary from the business you should automatically withhold your taxes (just as your employer would).  Designate a personal bank account just for estimated taxes.  Each month automatically transfer the correct amount into that account.  Do not touch this money.  In order for this to work successfully you will need to know how to budget.

You do not want to be on the wrong side with the IRS.

How to Pay Estimated Taxes

Visit https://www.eftps.gov/ and set up an account online.  You will be mailed a PIN and then you can activate your account.  Once you sign in, you will be able to link a bank account.  Link it to your bank account that has your estimated taxes which you have been withholding on a monthly basis.

Now you can schedule automatic quarterly payments.  You indicate the transaction date and amount and those funds will automatically be paid to the IRS on assigned date. Beside the “Tax Type” row, just enter “Estimated 1040 ES”.

Remember, if your income changes dramatically you will need to adjust your estimated tax payment.

If you are not sure that you are making the right calculations for estimating your taxes, it is recommended that you see a tax professional to ensure that you are estimating the correct amounts.

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Last Edited: 17th November 2023 The content of biblemoneymatters.com is for general information purposes only and does not constitute professional advice. Visitors to biblemoneymatters.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.

This article is about: Taxes, Tips

About Craig Ford

Craig Ford is a fulltime missionary in Papua New Guinea who writes Money Help For Christians and Help Me Travel Cheap, a frugal family travel blog. He is the author of Money Wisdom From Proverbs, has a Masters of Divinity degree, and (most importantly) eats homemade pizza with his family every Friday night.

Comments

    Share Your Thoughts: Cancel reply

  1. David says

    This is great stuff for the self-empolyed, and well worth keeping track of.

    Paying your taxes on a qurterly basis saves you money, as compared to waiting for the end of the year.
    David/Yourfinances101´s last post ..The Naked Portfolio Manager: A Review

    Reply
  2. Molly says

    I had been told that if you earn $600 and over, then you will receive a 1099 if you are an independent contracted employee. Is this the same thing?

    Molly

    Reply
  3. Craig Ford says

    @Molly
    Yes, if you earn a minimal amount of money as an independent contractor you will also need to make estimated tax payments on that income.

    Reply
  4. Paul @ FiscalGeek says

    Geez you scared me with your title thinking oh crud did I forget something. Well played Craig. April is still good :-).
    Paul @ FiscalGeek´s last post ..Book Review and Give Away: Your Money Ratios, 8 Simple Tools for Financial Security

    Reply
    • Peter Anderson says

      Remember if you’re paying your taxes for 2009, an estimated tax payment is due in January! :)

      Reply
  5. Kevin@OutOfYourRut says

    In the public accounting world we see the results of the self-employed NOT making estimates, over and over. The tendency to use gross income for cash flow can be overwhelming, but it catches up all too soon on April 15th.

    Outstanding advice and reminder!
    Kevin@OutOfYourRut´s last post ..7 Ways to Improve the Success of Your New Business

    Reply
  6. hanna says

    Do I pay self employment taxes out of my personal or business account?

    Reply
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