Have you been keeping track of how much you owe in taxes this year?

Do you know how much you owe in quarterly tax payments? Or, do you even know how to calculate it?

If not, that's alright! Most people are unsure. This is why we've compiled our best tips into the checklist below.

Learn What They Are

Simple put – quarterly estimated tax payments are estimates on how much you'll be paying in taxes for a given year. It's an estimate because you're estimating how much income you'll make and owe in taxes for it.

Essentially, you'll need to add your total tax liability for the year and divide it by four. You can always calculate your estimated taxes on the IRS' Estimated Tax Worksheet in Form 1040-ES for individuals. Or, Form 1120-W for corporations.

However, for a more accurate account of your liability, speak with a professionally trained accountant or CPA, like us at A.P Accounting and Tax Services. We work with you throughout the year to monitor your income, expenses, write-offs, and more. Ensuring your estimates are accurate and, you're not surprised come tax season.

Estimate Your Taxable Income

Your 'taxable income' might actually sound simpler than it is. Most guess their 'taxable income' is income earned with their salary. But, there are numerous deductions that should be accounted for.

Without the deductions, you might be getting an inaccurate read of your financial status and over-estimating the amount you have to pay.

Deductions that should be accounted for are known as 'above-the-line' and 'below-the-line'. 'Above-the-line' deductions are deductions that the IRS allows you to deduct directly from your gross income (to get your AGI or Adjusted Gross income).

'Above-the-line' means things like savings contributions, educator expenses, retirement plan contributions, and health insurance premiums.

Once you have your AGI, there are things you can deduct after your gross adjusted income. Otherwise known as the 'below-the-line' deductions. These are things you can also claim to receive a tax break.

This would be things like rent, business mileage, and office supplies.

Calculate the Income Tax

To figure out your income tax, you will need to multiply your adjusted gross income by your income tax rate. The income tax rate will be based on your income tax bracket. If you are unfamiliar with your bracket, check with the IRS's website or visit a professional for an assessment.

It is important to note that tax brackets are based on your taxable income. This amount should be the amount you get when you subtract all of the tax deductions you're eligible for.

Subtract Any Self-Employment Tax

To calculate your self-employment tax, you'll need to multiple your estimated income by your self-employment taxable income. Then, multiple this totally by 15.3 %. This number is the self-employment tax rate which rate is derived from the Social Security Tax and Medicare rates.

Crunch the Final Numbers

The final step is to add it all up and divide it by 4. So, add up your income tax, self-employment tax, and divide it all by 4.

Once you have these numbers, be sure to confirm the dates when you will need to make a payment. Be sure to check with the IRS (or your accountant) for the exact calendar dates.

It's also a good idea to keep a running tally of receipts and purchases you make throughout the year. Doing it regularly prevents the need to do it all at once and will help you categorize it come tax season.

If you'd be interested in learning more, or knowing what services would benefit you, give us a call at 407-328-5001.

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