How to pay my tax quarterly?

June 14, 2009 10:55 AM

Last minute Taxfilter! First time form 1040 user, more questions inside.

I just started a job as a freelance researcher.

From my understanding I'm supposed to file and pay quarterly tax; despite googling around for couple of hours, I'm still utterly confused:

Couple of related questions:

I understand the difference between form 1040ez, 1040A, 1040

-But what is the difference between form 1040 and 1040es?

-Which one do I have to file on June 15th (tomorrow)?

-Do I make itemized deductions quarterly or add them up at the end of the year? (e.g. deductible interest on my student loans which isn't available until end of the year.)

-I can't seem to find 2009 1040(EZ/A) anywhere, just forms for 2008

-If I overpay, how do I file for a refund at the end of the year? Do I have to file some other forms?

Thanks in advance for any help.

posted by pakoothefakoo to work & money (10 comments total)

For your quarterly taxes, use 1040-ES - estimated tax for individuals.

If you overpay, when Jan 31st comes around, you won't pay as much then.

1040es for estimated tax payments, 1040 and 1040 EZ are for /final/ forms you fill out for the 2009 calender year. You are just paying /estimated/ taxes now.
posted by bigmusic at 11:06 AM on June 14

1040-ES is a trivial form, it's basically just your name, SSN, and the amount you're paying. Fill that out with a check and you're done. The other 1040s are for next April.

The challenge is to calculate how much you should be pre-paying this quarter. One option that may apply to you is the prior year safe harbor. You also have some choice about which quarter you prepay what, particularly if your income is not smooth from month to month. It can get complicated.

The penalty for underpaying your estimate isn't horrible or punitive. Try to pay the right amount now, but don't stress about being off just a little bit.
posted by Nelson at 11:25 AM on June 14

(should add: I'm not an accountant or tax expert. I've just had to do my own 1040-ES a bunch of years.)
posted by Nelson at 11:25 AM on June 14

Since you will be reporting self-employment income using a Schedule C, you cannot use the 1040EZ or 1040A forms to report your taxes next April. You will have to use Form 1040.

Form 1040-ES is used to pay estimated taxes each quarter. There are two ways to pay estimated taxes. In the first method you total your income each quarter and subtract your exemptions and deductions. These are all estimates based on expected totals at the end of the year. Just follow the directions on Form 1040-ES.

The easier method is to just pay one-fourth of the total taxes you paid on last year's 1040. The disadvantage of this method is that you will overpay your estimated tax if your income is less than last year. This overpayment will be refunded next April or you can reduce the amount of your last payment in January. On the other hand, if you earn more than last year, you will underpay your estimated taxes. This is okay and doesn't require a penalty, but you will owe the balance of taxes in April.
posted by JackFlash at 11:56 AM on June 14 [1 favorite]

Apologies, I still don't quite understand.

So I have to fill out and mail in 1040ES 4x a year? Or just fill and mail it in just once and make the payments 4 time a year?

Then come April 2010, fill out a 1040 to finalize my payments for 2009, and pay more if I underpaid, and get a refund if I overpaid?
posted by pakoothefakoo at 12:24 PM on June 14

Yep, you've got it. You send in the 1040-ES payments four times a year, sending in 1/4 of the annual total. This is the equivalent of withholding for a normal paycheck where a small portion is withheld from each check. The dates are shown on the form: April 15, June 15, September 15 and January 15. These are just estimates. You settle up the actual total in April 2010.

Form 1040-ES is just a worksheet to make the estimated calculations for yourself. You don't send in the worksheet. You just send in your checks with the 1040-ES payment vouchers like a bank deposit slip.
posted by JackFlash at 12:32 PM on June 14 [1 favorite]

If you file your taxes completely by Jan 31 you can wait to send your final payment for 2009 at that date according the the 1040ES.
posted by bigmusic at 12:41 PM on June 14

So the final form will be 1040 with the itemized deductibles etc?

If that's the case, then I got it.

Many thanks!
posted by pakoothefakoo at 2:31 PM on June 14

Nevermind, I reread what Jackflash wrote.

I understand everything now. Thanks again y'all.
posted by pakoothefakoo at 2:37 PM on June 14

Make sure you are setting aside enough money to pay your self-employment tax (Social Security and Medicare) and not just your income tax. Self-employment tax surprises a lot of people their first tax year as a freelancer because they are used to their employer paying half and withholding the other half from their paychecks.
posted by Jacqueline at 7:18 PM on June 17