Do you HAVE to file estimated taxes and when do you have to start doing so?

Can't you just pay the taxes you owe when you file your tax return? Or will there be penalties because you didn't do a 1040-ES?

My first year income won't be very much. A couple grand at most...

I'm not an expert by any means, but I just went to the IRS website the other day with the same question. My understanding is, and someone correct me if I'm wrong, but if you are a sole proprietor, you wouldn't have to pay estimated payments. I would go to the IRS website and there is a questionaire about estimated taxes on the self employed page. I took that and it told me that I don't have to pay in estimated taxes. Hope that helps.

Debra Nail

I wouldn't worry about it your first year unless you expect to have a large income. The IRS assesses penalties for filing estimated taxes based on the previous year's taxable income. Also, there are deductions you can take on your tax return that could reduce your "taxable" income although it won't affect the "net income" on your income statement, such as mileage, or office-in-home expenses, depreciation, etc. So even though you actually made $2,000 you might wind up with a loss on your tax return. You could also have carry-forward loss from the previous year that could reduce the current year's taxable income.

Thanks for asking that question. I've been wondering, too.

I was wondering the same thing! I'm actually going to meet with an accountant next month (after tax season) to see where I stand and what I should be doing. If I find out anything helpful, I'll pass it along!

Although I only started last summer, I am now estimating my annual income and will be filing the self-employment and income taxes accordingly. This will ease the tax burden next spring and get me in the habit.

SE taxes are filed in 4 installments (15.3% of expected annual net income, I believe). The deposits are due no later than 04/15, 06/15, 09/15 and 01/15.

Income tax is filed quarterly (I deposit 20% of net income for the previous quarter) 04/15, 07/15, 09/15, 01/15.

I will adjust the 01/15 deposits to match actual income for the year.

Ask your accountant but I think I can help in a simplified manner: By the end of the tax year you are required to have paid in at least the amount of taxes that you owed last year or 90% of what you are going to owe this year as a household.
If you need to make quarterly payments to make that number, then you need to do so.
IF however, say your husband is working & is already having money deducted for income taxes that will cover your income also (especially if it is small as a start up) then you do not have to make any payments. (Does that make sense??)

Good answers. Just starting out and setting up. I've wonder about the social security part. Another thing to look into. Thanks for the infor. Pattyben

I was just getting ready to pay my first quarter taxes. (Late I know )Personally, I figure I'd rather do it now than wait and possibly not have the funds I'll need come tax time. I'd rather be safe than sorry I guess is my take on it.

Thanks for the info on it though.

Originally Posted by Nanners74

I was just getting ready to pay my first quarter taxes. (Late I know )Personally, I figure I'd rather do it now than wait and possibly not have the funds I'll need come tax time. I'd rather be safe than sorry I guess is my take on it. Thanks for the info on it though.

I am the same way!! I would much rather be safe than sorry & always tend to over estimate what I owe 'just in case'. I would rather have a surprise refund than an amount due that I did not anticipate!! I personally think that is smart business.