Filing Taxes Quarterly to Avoid the Vicious CycleYes, freelancers have to pay quarterlies too
Who Needs to Pay Estimated Quarterly Taxes?
According to the IRS, “The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated quarterly payments.” This means that as an independent worker, if you are earning money where taxes aren’t being taken out, you must make IRS payments on your earnings quarterly.If you expect to owe less than $1,000 in taxes after subtracting federal income tax you’ve paid already, or if your federal tax withholdings from another job equal 90% or more of what you will owe for the year, you are not required to make quarterly tax payments. This means you’re safe if what you’ll owe in taxes is under the $1,000 dollar mark or your other job has withheld 90% of your tax burden.
What If I’m Not Required to Pay Quarterly?
If you are not required to make quarterly tax payments, it is very important to remember that you must still be able to pay enough income tax throughout the year to fulfill your income tax requirement, including a self-employment tax, which is your contribution to Social Security and Medicare. It is thus a very good idea to file your quarterly estimated tax returns in advance in order to avoid paying penalties and interest in April. Filing quarterly estimated payments also allows you to spread the payment throughout the year in a more manageable manner. This way, you avoid being hit with a large, one-time payment, which can really hurt a small business. Ouch!
The IRS penalty for those who should file quarterly but fail to do so can be up to 6% for every month the payment is late. An additional $100 penalty is assessed if payments are 60 days or more late. There are generally also penalties applied for underpayment of estimated taxes. Underpaying or ignoring estimated taxes can result in a vicious cycle of noncompliance with tax obligations, as penalties and interest build. No one wants that!
RoamHR Makes Quarterly Payments Easy
RoamHR is the first Intelligent Tax Savings Account to hit the App Store. RoamHR will estimate your taxes using a proprietary algorithm, and then move withholdings into a secure Tax Savings Account for you. You can even set up the application to pay your estimated quarterly payments for you – no hassle, no worry! The RoamHR application is available now for download in the Apple iStore and the Google Play Store.