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Do I Have to File Quarterly Taxes?

Do I Have to File Quarterly Taxes?

When the subject of self-employment taxes comes up, every forum I’ve ever joined has always stirred questions and professionals talking about quarterly taxes. If you pose a self-employed tax question on a forum, you’re always going to get at least one person who says you have to file quarterly taxes as a self-employed person. 

This is true…but only in certain situations. Most new freelancers don’t need to worry about quarterly taxes. Not unless they have a spouse who works or have income from another source. According to the IRS 2010 Tax Tables, you must have $9,450 in taxable income (line 43, on the 1040 form) before you owe more than $1,000 in tax liabilities. That’s taxable income…after deductions and such are taken out. (In other words, your Adjusted Gross Income, minus standard (or itemized) deductions and exemptions, has to be more than $9,450 to have $1,003 in tax liability.) 

Image courtesy Darren Shaw, http://www.whitespark.ca/


You can read up about estimated tax payments and what’s involved on the IRS’s Estimated Taxes page. Estimated taxes go by what you made last year, assuming everything will be the same this year. For those just starting out, obviously things have changed, so this year’s taxes won’t be the same as last year. So what do you do? 

In short, this is what you need to know…you DO NOT have to file quarterly taxes and pay estimated taxes if the following criteria applies

  • You expect to have less than $1,000 in TAX LIABILITY for the year. Note, that’s tax liability. In other words, if you expect to have to pay MORE than $1,000 in personal income taxes, then you have to pay quarterly or risk penalties. That’s your total tax, not what’s left to pay after withholding. It’s $1,000 in TOTAL tax liability.
  • If you file as a corporation, that number is cut in half. As a corporation, if you expect to have more than $500 in tax liability, then you have to file quarterly.

If this is your first year as a freelance writer, you can (in some situations) wait to figure out if you need to pay quarterly and estimate your taxes for the following year. That is, if you: 

  • Had no tax liability last year. In other words, after income and deductions, you owed NO taxes. Not that you didn’t have to pay in, but that you owed zero in tax liabilities. That means the IRS kept NONE of your tax withholding for the year (if you or your spouse worked for a regular paycheck.) You owed Uncle Sam nothing. Not a thin red cent. He had to give you back everything you paid in. Every dime.
  • You are a US citizen (sorry to our foreign guests…you guys are different if you’re living here in the states and have to file US income taxes.)
  • Last year’s taxes covered the entire year…all 12 months.

If that’s the case, you don’t have to worry so much about filing quarterly taxes this year. You can wait and see how much you wind up owing by the end of the tax year and make a decision about filing quarterly for later years. That is, so long as you realistically don’t expect to have more than $1,000 in tax liability. 

Now, if your spouse works, things might be different. Take a look at last year’s taxes. What was your tax liability for the year? Were you close to the $1,000 mark already, without your income from writing? If so, your best bet is to go ahead and send in estimated tax payments. If you wind up owing nothing in tax liabilities, or you and your spouse are under the $1,000 limit and expect it to stay that way, then you don’t have to worry about quarterly taxes.

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Sandi Johnson, owner of The Blue Inkwell, is a reformed corporate management professional, with degrees in business and accounting, collecting dust on the walls of her rural Georgia home. Instead of mind-numbing cubicle living, she spends her days transforming the ideas and stories of herself and others into her favorite medium – the written word. As a freelance writer, Sandi writes for a living to support her hobbies; writing, reading, hobby farming…and sometimes feeding and watering her teenage children.

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