We have goods news and bad news for those concerned with estimated taxes. The bad news is that estimated taxes for the fourth quarter of 2010 are due on Tuesday, January 18th, 2011. The good news is that estimated taxes for 2011 should be lower now that self employment tax is 13.3% and not 15.3%.
Estimated Tax Due Dates
Quarterly estimated taxes are due on the 15th of April, June, September & January unless there is a holiday or it falls on the weekend in which the due date is moved to the next business day.
Who is Required to File Estimated Taxes?
The government requires the self employed and individuals with significant investment income to pay estimated taxes throughout the year. It’s equivalent to taxes being withheld from your paycheck if you were employed by a company for the income you earn. It can get complicated trying to figure out the estimated tax for each year and the method depends on your income level as discussed below.
Adjusted Gross Income is Equal or Less Than $150,000
You can pay 90% of their income tax liability for this year or 100% of your income tax liability from last year (divided by 4 for each quarter).
Adjusted Gross Income is Greater Than $150,000
You can pay 90% of income tax liability for this year or 110% of your income tax liability from last year.
Self Employed Estimated Taxes Could Be Lower in 2011
The self employment tax for 2011 is decreasing to 13.3% from 15.3% in 2010. This means that the self employed will likely owe less estimated taxes in 2011 if they choose to pay based on 2011 expected income tax liability. This also assumes your income level will be consistent to the prior year.
More Estimated Tax Questions?
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