Im self employed and trying to figure out est. taxes for 2007. Is there a program or company that can help?

Question

My issue is that I get that I need to estimate it from last year but the IRS website says that I have to fill out the form 1040-ES and I am not sure how to answer the questions. I feel realy dumb and would rather have someone walk me through it in plain language.

Answer 1

A conservative rule is for your 1st quarter payment (which was due 4/15) you should have paid in 30% of your last years liability. By 6/15, your 2nd quarter you should pay in 60% of your last year's tax. By 9/15 you should pay 90% of your tax and by 12/31 110%. The only time when that would change is if you expect that most of your income will be earned in a particular quarter. For example, if all year you don't earn anything and in December you sell a whole bunch of stock and have gains, then you can annualize your estimated payments and not pay anything until December. Also, if you expect to make a lot more money this year than last year, then you may want to give yourself a little more cushion than 10%. But that's only if you want to. IRS requires that you pay the smaller of 90% or 100% of prior years liability to avoid penalties. If you didn't make any money last year and you didn't pay a tax, then you don't have to make estimated payments (100% of $0 is $0).
The reason I suggest 110% is so that my clients don't get a surprise liability in April. Most people increase their revenues a little from year to year, but as a business owner you probobly already know where that's leading. If you have decided not to use an accountant to file your taxes, then perhaps it would be a good idea for you to go over the 1040 ES forms as well as reading publication 505. Both you can find on IRS website www.irs.gov

Answer 2

Plain language and IRS forms are mutually exclusive. However I'll give it a shot.

Please keep in mind, the details below do not guarantee that you will not owe taxes when you file your tax return, it only guarantees that you will pay enough taxes to avoid owing an underpayment penalty. And you will not have to go through the pain of trying to complete the Form 1040 ES worksheet.

If you filed Form 1040 for 2006, look on Page 2 of the Form 1040. Look at line 38. If the amount on that line is less than $150,000, then take the amount on line 63, of that same page and divide it by four. This is the amount of your estimated tax payments to be made on (Apr 15, Jun 15, Sep 15) of 2007 and Jan 15 of 2008.

If the amount on Line 38 of Page 2 of the Form 1040 is greater than $150,000, then multiply line 63 by 110% and divide it by 4. This then would be the amount you would pay on each of the four payments, to avoid an underpayment penalty.

Since we are already past the Apr 15th 1st payment due date, you would want to make a double payment for the Jun 15th payment. Because you missed the first payment, you might end up owing an underpayment penalty, just not as much as if you didn't make the estimated tax payments. If you didn't start making money until after Apr 15th, then no problem. Just divide the above by numbers by 3 instead of 4.

Believe it or not although this is many words, this is really quite a basic description of how to calculate your estimated tax payment amounts. There are many, many more details I have left out to try and keep it as simple as possible. I apologize for our lawmakers for making it so complex and incomprehensible for all of us.

If this does not give you the information you need, please feel free to contact me directly, as this is one of the services my company does for our clients.

Answer 3

Generally any off the shelf tax program will allow you to do estimated taxes for the following year. If you don't want to pay the link below will provide the IRS instructions for 1040ES. That form is really four vouchers that you attach with your estimated payments to identify them so that they get credited to you. If you have no idea what your income is going to be for 2007 because this is the first year you need to have an imaginative approach. "Estimate" you income and figure the potential tax number on line 46 of your return. Divide that by four and send in a quarter of that by April 16, 2007 (now is close). On the second, third and forth quarter you can make an adjustment up or down. You only need to be within a $1,000 of the total tax due to avoid penalty.
http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Answer 4

there is not any way they could legally pay you as self-employed 1099 worker your activity in uncomplicated terms qualifies as an worker, the place you're meant to fill out an I-(, W-4 and different worker place of work work, and the business business enterprise could desire to withhold and deposit payroll taxes and supply you a W-2 each and every 3 hundred and sixty 5 days - AND - you will be getting a paystub each and every pay showing your hours labored, gross pay and all taxes and deduction being withheld - in the event that they don't seem to be doing that AND your paycheck is even one penny below the hourly cost you're meant to be making circumstances your hours labored, then they're additionally stealing money from you and is extra desirable than one worker is being paid a similar way - you may all celebration and confront him and demand being paid precise or you may all touch the state dept ff labor - in the event that they don;t do this, tell them you will document them to the IRS and State dept of work - then seem for a sparkling activity do you comprehend that as a "self-employed 1099" worker - you're no longer eligible for unemployment in case you lose your activity? that's with the help of the fact the business business enterprise isn't paying into the state unemployment equipment for you

Answer 5

What did you pay for 2006?
I would estimate from that. If, you expect to make more money this year add 10-20% and go with that. I guess that how I would do it.

Answer 6

TurboTax offers a program that helps compute estimated tax. You can do it yourself if you don't want to purchase the program use this web site if you want
http://taxes.about.com/od/taxplanning/ht/estimated_taxes.htm

Hope this helps.