How to calculate estimated taxes - 1040-ES Explained! {Calculator Available}
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- เผยแพร่เมื่อ 26 มิ.ย. 2024
- Get your copy of the Estimated Tax Worksheet here for $19: learn.claracfo.com/4a23b2dc-d...
Get the IRS form 1040-ES here: www.irs.gov/pub/irs-pdf/f1040...
To learn how to pay estimated taxes, watch this video: • How to pay estimated q...
Don't let estimated tax payments give you headaches anymore! In this video we demystify the process of estimating taxes and the IRS form 1040-ES.
We go over:
- Why we need to pay estimated taxes
- When are estimated taxes due
- What minimums we need to consider
- Strategies for choosing what amounts to pay
- Examples of calculating estimated tax payments
- And a walkthrough of the easy spreadsheet Hannah made for YOU!
Don't get hit with penalties for misunderstanding and underpaying your taxes. Save money and stress by getting this right every year!
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Hannah Smolinski is a #CPA and the Founder of Clara CFO Group. Find out more about Clara CFO Group at claracfo.com/
Disclaimer: This video is intended for educational purposes and
should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Clara CFO Group, LLC is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience.
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I have gone thru about 4-5 or videos. This one is the best for anyone looking for a real world example to understand the 1040-ES. She actually give examples instead of explaining each column from a 1500 foot CPA point of view. Worth watching. Thanks for the great video.
Thanks so much, happy to help 😁
The reason why the IRS wants estimated taxes is actually because the government doesn’t want you to use your profits for growth, the government wants to use your profits for their debts!
This is so helpful! I am new to the world of small business and estimated taxes, and I am glad I came across your channel. ❤
So glad! Thanks for watching!
Thanks Hannah - the spreadsheet is great!
Thanks Laura! Glad it is helpful!
Thank you. Super helpful. Your spreadsheet was a big help once I got my mind wrapped around it. Worth the price. Thank you for your detailed video and clarity.
You are so welcome! Anything tax related can be daunting and confusing. Glad I could help and the spreadsheet worked out for you!
I just want to say thank you so much! You saved me 😂😂😂 I was stressin sooooo bad because I didn’t know what to do! Your a blessing thank you!
So glad it has helped!!
@@ClaraCFO I was wondering about estimated quarterly tax payments for the IRS in regard to traditional IRA withdrawals. I'm 61 years old. I had no taxable income last year. I am single. I'm about to withdraw $107,050 from my IRA. I'm going to withdraw it in Late July maybe early August. I'm using the money towards the purchase of a house. I did own a house just weeks ago, but my former husband received the house in our divorce settlement. I understand the tax on that will be $34,647.50. My question is can I wait until the new year to pay the tax, or do I have to do quarterly or estimated tax payments, which I guess are the same thing from my understanding? If I do have to do quarterly or estimated taxes I was thinking of waiting until around January 11th, 2023 to pay it if the penalty and interest is less than what the taxes would be on the additional funds I would need to withdraw from my IRA to cover the taxes. TY
Great model! Super helpful!
So glad it's helpful to you!
I loved the video! It was great and very informative.
Amazing! Thanks for watching!
🙏 thank you for all the great info!
You are so welcome!
Great job of explaining this 'boring' stuff! Thanks!
Haha thanks!
so helpful! thank you!
So glad!! 🙌
Thanks, very helpful.
Glad I could help!
Thank you Hannah! As an S Corp owner this is exactly what I needed. Spreadsheet purchased and GREAT VIDEO!
Yay! Glad I could help!
This is so helpful! Do you have a video on how to calculate state estimated taxes?
Thank you for this video extremely informative and helpful. God Bless you. New subscriber.
So glad you found it helpful!
@@ClaraCFO I did thank you !
very helpful! thank you
Glad it was helpful!
Great work sheet
Thank you so much 😀 Would love to know what you found most helpful!
@@ClaraCFO It's shows a simple calculation for the everyone.
Thanks Hannah! A question - for PY Tax on the spreadsheet, would this be from last year's 1040 Line 24 or 25a
❤ awesome stuff
Thanks for watching!
Thanks for helping people. I'm curious looking back on last year's taxes, why would I have gotten a 1040es voucher dated 2023 when I didn't even put a "side gig" on my taxes last year.
good video.
Thanks!
THANK YOU omg
You're so welcome!! Thanks for watching!
@@ClaraCFO I bought your worksheet... You hit the nail on the head when you said that IRS guidance is often more confusing than the law itself
@@obelisk8389 Totally! glad I could help simplify!
Thank you Hannah! Your spreadsheet is amazing!! I was wondering where I get the SE Tax (Tab) line 6, earnings subject to SS? There was not much info on this particular tab. I am an LLC.
You'll have to look at the IRS instructions for Schedule SE to explain it. It's usually your net profit multiplied by 92.35%. On Schedule SE, line 6 is line 4c + line 5b, where line 5 only applies to church employees.
Hello Hannah! You got the best video regarding estimated taxes. Can you briefly explain this scenario: Let's say I work for a corporation (not mine) and I get a W2 pay twice a month. Now, I want to sell stocks (short-term) and let's assume I gain $40,000 this quarter. How do I pay the estimated tax?
For the spreadsheet, is the W2 wage the same amount that is normally reported on line 1 of the W2? Which is gross wage including Scorp medical insurance premiums and then minus 401K contributions?
hi there love your videos so far, im starting a new business jan 2024, single owner llc, not knowing what my yearly income will be, would i just take the first quarter income and just mulitply it by 4 to get my estimated yr income then pay taxes on that amount,, then if i make more in Q2 just recalculate with the 1040es with the updated amount..
This is super helpful, thanks so much! One question I have is what to put on line 15 if you have inconsistent income and know that you will not have equal incomes each quarter. In my case, I am a gig economy delivery driver (self employed) and tend to make more in the summers than the winters, so I don't feel comfortable dividing my gross income by four if that makes sense. Could I also refile/remail the 1040-ES to the IRS each quarter as I refigure my income since it's so variable? I definitely want to avoid penalties/underpaying. Thanks for any insight into this. :)
The spreadsheet in this video will work for people whose income is even throughout the year and only have earned income, BUT:
- the tax table shown in the video won't figure the tax correctly if some of the income is from qualified dividends or long-term capital gains
- if your income varies throughout the year, then best practice is to use the Annualized Estimated Tax worksheet instead of this one. On that worksheet, you take your income for January through the end of each period, use a multiplier to expand it out to an "annual" number, then continue with figuring your required payment for the period based on the annualized amount. You'll also need to be sure your federal tax return includes Form 2210 and Schedule AI even if you do not owe a penalty. Hannah's spreadsheet will make do if the income and tax payments are higher at the beginning of the year, but if your business has a surge of realized income closer to the end of the year and you don't file those schedules, then your return could get flagged because the IRS will assume you underpaid your estimated tax in the first two quarters.
Clara, you are both beautiful and helpful!
Thank you 🙏
I have three (3) sources of income: [1] retirement pension, [2] soc. sec. retirement benefit, [3] self-employment. When figuring estimated tax, do I calculate based on the TOTAL income, or calculate them separately (in particular, the self-employment tax)?
I am a fairily new business owner and don't have a full previous year to help figure out my quarterly taxes. How would I figure out my state and federal amounts based on that amount I made during each quarterly. For example, if I made $8,000 what would I multiply to figure out each amount I owe? I live in Wisconsin so would it be 8,000 x .153 for the state and 8,000 x .22 for the federal?
Thanks for the video. Helps a ton!
Is this still relevant for the 2024 FY / 2025 tax season?
Yes! The calculator has been updated!
Hi Clara, If I open an LLC for property investment, but the home is under my name and not to the LLC. Can I collect the money under the LLC and report the expenses too?
Clara...I know you did not go in depth with the SE, but why do you use 150K when explaining that sheet instead of 50K? I would think that the first 100k were already accounted for because of the W2. Can you clarify?
Do we receive any form from the IRS showing our 1040-ES Payments? For example, if I am making taxes via TurboTax, how do I tell them I already pre-paid some taxes?
why did you put $0 for line 6 on the self employment tab? I thought it was supposed to be the same as line 3.
I'm now retired and have only IRA distributions and savings interest as income. Since these amounts will often vary throughout the year, can I just estimate my taxes that were due for the previous quarter, and pay the IRS by the deadline dates? Or does the IRS frown on this, most likely penalize me, even though I make quarterly payments of the correct amount?
Thanks so much for the video! I do have a question. You made it sound, in the video and in a comment, that it's ok if you didn't make the right payments every quarter. Like, if you paid very little early on and decided to catch up later, or if you didn't know you had to make payments and decided to pay it all last quarter. I thought that you could still incur a penalty if you did these things? I thought I read that it's fine to pay all upfront if you want, but the IRS wants its money and won't accept you paying less per quarter than was calculated. Sorry, I just got a bit confused. First year doing this!
Hi Melissa - the important thing is that you get it close by the end of the year. So if you accidentally underestimate one quarter (or even all three), you can make it up in Q4. Just make sure that year-to-date number is close! The benefit of doing it along the way is that you don't have to come up with a bunch of money at the end of the year for that Q4 payment.
Don't have visibility to tax information since IRS seems to be doing maintenance until January 22nd, I will pay and hope it goes through ok.
Are you trying to make a payment or look at your account?
@@ClaraCFO I will make a payment but also wanted to look at my account. 😊
@@samshutt4359 oh yes, I'm having problems with that too! Hoping they get maintenance done soon....what a horrible time to do maintenance!
Nice content. An ibstill expected to pay quaterly taxes if my business is still not profitable?
If you aren't profitable during the quarterly period, no, you don't need to pay estimated taxes. If you are at a loss for the year, you likely won't have a tax payment! But be sure to coordinate with your CPA and make sure you don't have other aspects of your tax scenario that might cause you to need to make payments!
Hi,
I am filling out a CSU application for college and it is asking me to input my Parents' adjusted gross income (AGI) for 2022 and my Parents' untaxed income and benefits for 2022. I know the AGI can be found on line 11 of the 1040 form on the 2022 Individual Tax Return, but I want to confirm where I can find the amount for the untaxed income and benefits? Is it line 2a where it says “Tax-exempt interest” or is it line 2b where it says “Taxable interest”? Line 2a is blank, but line 2b has an amount. Which one would I put?
Thank you!
What would I need to do if I just started LLC with only 2K in profit so far? I hope I am going to make more, How would I calculate estimated taxes? Thank you!
Hi, I'm a little lost on the QBI portion. How did you calculate that amount?
You take 20% unless your income is over the limits listed! It's like a free 20% off your business income...yay!
Do you have a new sheet available for 2023 tax rates, for purchase? Thanks
We've recently updated the calculator for 2024! --> learn.claracfo.com/4a23b2dc-dc10-4aac-a6b8-84e8d73dfd73
Will this spreadsheet work for someone operating a single member LLC?
Yes, it works for all business types.
Does this worksheet only work in Excel?
Yes it is built for Excel.
Very helpful. I want to purchase your digital download spreadsheet but it is for 2021 and 2022. I don't need 2021 and wanted to see if you Will you be offering a spreadsheet for 2022 and 2023 soon? Or a discount for the current one since it includes 2021 and I only need 2022? Thank you!
Hi! So it is for 2022 now as we updated it to remove 2021. We will do another spreadsheet for 2023 when the forms are avaliable. If you need it to estimate this year's taxes, then the current spreadsheet is for you!
Customers have been really happy with the spreadsheet, and we hope you'll love it too!
@@ClaraCFO Thanks for the update!
Have you made a 2023-2024 yet?
Does this worksheet include anything for the form 2210? I work a regular job and make about 50000 I put in the max 401k. I randomly sell long term stock thru the year. I need to know the best way to calculate my estimated income. Great video.
No, it does not. The whole worksheet is shown in the video. Thanks!
Worksheets for the Annualized Income Installment Method and Qualified Dividends and Capital Gains Tax are found in Chapter 2 of Pub. 505, but you may be able to adjust your W-4 to cover it
www.irs.gov/pub/irs-pdf/p505.pdf
What if it’s a brand new job I just started and I started in the second quarter ?
Do you mean upon got a job as an employee somewhere? If so, you probably don't need to pay estimated taxes.
Will there be a spreadsheet for 2024 available soon?
Yes! You can grab the updated version here --> learn.claracfo.com/4a23b2dc-dc10-4aac-a6b8-84e8d73dfd73
If you underestimate your gross income will there be a penalty?
You have each quarter to true up your calculation, so the most important estimated payment is at q4 where you know if you're close on your estimates or not. There are penalties for underpayment, but it's not on a quarterly basis. You just need to get the total for the year pretty close!
I get a W-2 for my full time and part time but the schedule-C (self-employment tax) really screwed me on my return. So frustrating when you are trying to get ahead and end up owing money at the end of the year that you don't have readily available to pay. Ugh.
By the way I have eBay and Amazon as a small business owner, sole proprietorship.
Why is everyone concerned about estimated taxes. 26 CFR 1.0-1 paragraph (d) of the IRC OF 1954 clearly says TAXABLE YEARS began December 31 1953 and ENDED AUGUST 16 1954, passed into LAW by the 83rd Congress AS LAW and published AS Volume 68A of the United States Statutes at Large.....AS LAW! Any Subtitle F compliant enforcement provisions took effect on the day AFTER the date of ENACTMENT which was August 17 1954 but on that day there was NO TAX TO ENFORCE AS the tax died expired the day before on August 16 1954! There HAS NOT BEEN AN ENFORCEABLE LEGAL INCOME TAX in this country for 70 YEARS!!
Estimated taxes became part of my life thanks to the Republicans’ 2018 overhaul and I can no longer itemize my deductions anymore and you can’t ever withhold enough from my paycheck.
You can itemize deductions - but the standard deduction is so high now, that for a lot of people it doesn't make sense to itemize.
Estimated taxes are a reality for any business making a profit. I see that as a positive thing - shows that you are making money! Greg Crabtree says that taxes paid are a key performance indicator for his clients! Just a different perspective :)
Somebody has to pay for the open border policy.
I dont know how much I owe. Ive been paying my taxes annually instead estimated taxes. I've been running as self-employed since 2018 = 5 years
Where is the worksheet
Here it is: learn.claracfo.com/4a23b2dc-dc10-4aac-a6b8-84e8d73dfd73
Income tax is voluntary.
I suppose that is true. You just have to live with the consequences!
@@ClaraCFO what do you even mean by that? Tell people to file IRS form W-4v! or W-8BEN and if you are an employer, W-8BEN-E!
@@3Systems6Buster9 She means that you’ll go to jail if you commit tax evasion.
Where is the worksheet
Here: learn.claracfo.com/4a23b2dc-dc10-4aac-a6b8-84e8d73dfd73