Calculating your 1040-ES Payments

So you’re not underpaid when tax time rolls around

Photo by Ben Wicks on Unsplash

Attention all gig workers, business owners, and self-employed individuals. June 15th is just around the corner, and you know what that means — it’s time to send Uncle Sam an estimated tax payment.

I know, yuck! We didn’t start chasing our dreams only to get bogged down with taxes. But it’s a necessary evil that goes along with charting our own courses.

First, some general info. Anyone working in the U.S. who does not receive a traditional paycheck with federal income, social security, and Medicare taxes withheld is required to make quarterly estimated tax payments to the IRS. Basically, the IRS says just send us what you think you owe, and at the end of the year we’ll settle up.

Sounds easy, right? The problem lies in how we estimate what we think we owe. If we over-estimate, then we get a refund in April when we file our tax return. That’s all well and good, but if you get a huge refund, that means you’ve just given the government an interest free loan. And if you under-estimate, then the government is going to add on a bunch of interest and penalties to the remaining balance due. We definitely don’t want that.

I am a business owner, an independent author, and I have been working in public accounting…