# Freelance Life: Estimated Quarterly Taxes

I may be way off on this… but my calculations amount to an:

Estimated Quarterly Tax: \$6,706

Without the help of a CPA, I’m trying to figure out my estimated quarterly tax payment. My calculations, while likely closer to accurate than I’d like to believe, are definitely more than I have in my “for taxes” saving account.

The good news is that for this year at least, I’m allowed to put 90% of my previous year’s taxes into my estimated tax payments each quarter. And last year, since I was working full time and making much less money, my tax payments for the year were not that huge. I think… and please correct me if I’m wrong… that as long as I pay 90% of last year’s taxes (divided by four) then at the very least the government won’t be charging me any penalty fees.

Regardless, I probably should try to just pay 100% of my estimated tax to avoid a really awful April 2009.

That said… I’m trying to understand these calculations, without figuring out my deductions (since any deductions I can take will just mean that I can get a refund. And I’d rather just get a refund than deal with sorting out deductions each quarter. It’s hard enough to do it once a year!)

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Tax Guestimates

Assuming I make \$5500 a month for the entire year (I’m overestimating given that I’m making about \$5000-\$5300 now in any given month… some months I make more.)

TOTAL TAXES = \$26,821.362 (or 40.6% of \$66k yearly income)

FEDERAL
[\$8025 at 10%] \$0 – \$8025 = \$802.50
[\$24524 at 15%] \$8026-\$32550 = \$3678.50
[\$33,449 at 25%] \$32,551 – (\$78,850) \$66,000 = \$8,362.25

Total Federal Tax: \$12,843.25

STATE

0% \$0 – \$6828 = \$0
[\$9357 at 2% ] \$6829 – \$16186 = \$187.14
[\$9358 at 4%] \$16187 – 25545 = \$374.32
[\$10,005 at 6%] \$25456 – 35461 = \$600.30
[\$9353 at 8%] \$35462 – 44,815 = \$748.24
[\$21,184 at 9.3%] \$44816 – 66,000 = \$1970.112

Total State Tax: \$3880.112

SELF EMPLOYMENT TAX

[\$66,000 at 15.3%] = \$10,098

Total Self Employment Tax: \$10,098

Estimated Quarterly Tax: \$6706

Eeks!!! \$6,706?

I’ve only saved about \$4,500 for this quarter’s taxes. Well, I’ll really be saving more like \$6,500, but I don’t get paid until the end of the month, so the next \$2,000 I’d put away, which would be for my March-April “month” of work ending April 20, will not be paid until the end of the month. So how am I supposed to pay that in advance?

I’m so, so, so confused.

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### One comment

1. less says:

Well now I am reading old posts about estimated taxes as well, since they show up in the related posts list.

This was 9 years ago, so presumably you got it figure out, but in case anyone ends up reading this when looking for info about estimated taxes, I will just say that it’s important to include work expenses in your estimated tax calculations because otherwise you will overpay. Work expenses for self-employed people make a big difference so make sure to track things carefully.

Also in one of the posts I just read, you didn’t include anything in exemptions — everyone gets at least 1, if you have dependents you get more — or for itemized deductions. If you don’t know what your itemized deductions will be you can just use the standard deduction.

Taxable income = Adjustable Gross Income less personal exemption(s) less standard deduction or itemized deduction.

Adjustable gross income = wages plus net profit from self employment [which is self-employment income less work-related expenses] plus any other income [distributions/withdrawals from retirement accounts, gains from the sale of stocks or other property, etc.] less 1/2 self-employment taxes.