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!)
—-
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.