Estimated taxes are taxes paid on income that is not subject to withholding. In other words, any income that hasn’t already had taxes automatically deducted.
- If you’re someone else’s employee and get regular checks, you’ll notice that a portion of your wages is taken out or withheld for taxes. That means your employer has done the work for you: Figured out your taxes and sent them along to the IRS in your name. I can appreciate that now, but I still remember getting my first paycheck when I was in high school and thinking my boss ripped me off. I learned about taxes pretty early on.
- If you’re self-employed though, it’s unlikely that you withhold money every time you pay yourself. Similarly, if you’re a contractor, your earnings typically won’t have any taxes withheld. That’s where estimated taxes come in.
To learn more about estimated taxes, who they apply to, and even how to pay them, read our blog at: https://lessaccounting.com/blog/getting-started-with-estimated-taxes/