Freelancers Who Pay Estimated Taxes to the IRS, Here's a Tip For You

NOTE: Let me state up front that I am a sole proprietor. So I'm working from that experience. Regardless, for all business types, consult your accountant or financial advisor or attorney.

If you are a freelancer who pays quarterly estimated tax payments to the IRS, we all pretty well remember the dates associated with those four IRS quarters (not to be confused with what accountants may deem as the standard quarters of any calendar year, BTW).

These IRS quarters are usually on (or after in some years) the fifteenth day of April, June, September, and January of the following calendar year. See IRS Form 1040-ES for each tax year to confirm.

Per the IRS.gov website (found at https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2), a chart is provided of actual deadlines for 2020 estimated taxes. Although "2020" is not specifically stated, in the footnote at the bottom, it notes "Page Last Reviewed or Updated: 25-Nov-2019." And I've checked my 2020 calendar to confirm all these dates fall on weekdays (no weekends).

When to Pay Estimated Tax

 

Payment Period	Due Date
January 1 – March 31	April 15
April 1 – May 31	June 15
June 1 – August 31	September 15
September 1 – December 31	January 15* of the following year. *See January payment in Chapter 2 of Publication 505, Tax Withholding and Estimated Tax

But did you know that you can make multiple payments toward each of the four quarterly deadlines?

Per the IRS.gov website again (found at https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes), here's an excerpt relevant to this discussion, but you should particularly read the part I've bolded therein:

When To Pay Estimated Taxes

For estimated tax purposes, the year is divided into four payment periods. You may send estimated tax payments with Form 1040-ES by mail, or you can pay online, by phone or from your mobile device using the IRS2Go app. Visit IRS.gov/payments to view all the options. For additional information, refer to Publication 505, Tax Withholding and Estimated Tax.

Using the Electronic Federal Tax Payment System (EFTPS) is the easiest way for individuals as well as businesses to pay federal taxes. Make ALL of your federal tax payments including federal tax deposits (FTDs), installment agreement and estimated tax payments using EFTPS. If it’s easier to pay your estimated taxes weekly, bi-weekly, monthly, etc. you can, as long as you’ve paid enough in by the end of the quarter. Using EFTPS, you can access a history of your payments, so you know how much and when you made your estimated tax payments. [Emphasis added.]

Granted, I would like to hold on to my money as long as possible to cover any surprise expenses that may come. However, I have to balance that mind-set with the reality of paying a huge (IMO) chunk of money to the IRS quarterly to avoid paying an even bigger wad come income tax time.

Obviously I'll make those four IRS deadlines for quarterly payments/income tax payments. But for the other eight months of the year? Yeah. I think I will make a monthly payment. Both my bank and my online payment system give me monthly earnings calculations, so it's easy to then apply my 15.3% in self-employment taxes (adding in a guesstimate to cover actual income taxes), to arrive at a relevant monthly figure that I owe the IRS. I'll tweak each month accordingly, especially around those four tax-time months.

Now if you are making the big bucks, this may not work for you. Especially when you can earn some major interest on your own money in the meantime. I get that. Then wait to the last minute to fork over that IRS payment. But me? I'm making pennies on my dollars that sit in plain old checking and savings accounts. So better for me to send that money earlier to the IRS rather than maybe spend it on splurges at the grocery store. In my financial world, if it's in my checking account, my net balance (taking into account the pending bills to be paid), seems like free money to me. Knowing this about me, I can't let that tax money end up in my checking account. :)

Just remember. Freelancers, whether poor or rich, need a financial plan. If yours is to avoid credit card debt or to set up an emergency fund with six months' worth of living expenses therein, you must figure that out for yourself, based on your particular circumstances.

Help stop the worry by starting an emergency fund, paying in estimated taxes more often, even meditating and deep breathing and voicing your gratitude and exercising and sunbathing and forest bathing and reading and journaling and writing and whatever else adds more joy to your life.

Overall, be kind to yourself and others. Amen.

Welcome to My World, Where Every Day Is a Saturday

Denise Barker, Author, Blogger, Copy Editor
Books that Build Character(s)

amazon.com/author/denisebarker

https://deniseannbarker.com

Time = Stress

We live in a dimension with time. God doesn't. Once we get to heaven, there is eternity instead.

But while we are in these bodies, earthbound, time kinda rules us. I found this great quote today:

Everywhere is walking distance if you have the time. Steven Wright

And I had to laugh. If we take "time" out of our equations, doesn't it take away the stress? I know it does for me.

Time equals stress.

If it is 1:20 p.m. and you were supposed to be at work by 1:00 p.m., you may feel stressed.

If it is April 15 nearing midnight, you might be feeling stressed.

If it is your fiftieth birthday coming up on Sunday, you could be feeling stressed.

But if you work for yourself, and can claim any hours of the day (or night) to dive in, then you probably don't mind the delay one bit.

And if you filed your income taxes early, then 04.15 has no effect upon you.

Plus, once you are eternal, you won't be celebrating birthdays that end in zeros.

So take time out of the equation (as in, work for yourself and throw that alarm clock in the trash).

Or let time work for you instead of against you (like saving money monthly starting when you are young instead of waiting until you are sixty).

For me, that means no more trying to be a marketing guru or even just understanding today's particular trends, which change anyway.

No more.

I love my blogging. I love Pinterest. I have done both for a while now. I will continue with it.

And my intended readership will find my books via the passage of enough time. To me, marketing is trying to get there faster. Kudos to you who know how to work that system.

Why am I trying to hurry the process? 

Yes, I will dance in my kitchen when I become a self-sustaining author. But I have (and love) my freelancing projects, which pay my bills. 

So why would I choose to add stress to my day by trying to learn something that is forever changing and for which I am not adapted or have no natural inclination?

I'm surprised I'm just now realizing this. Ha!

So, I'm not gonna try anymore.
 
Marketing is a weak area of mine. I'm letting it go. I'm saving my attentions for those things I love doing and over which I have control: my writing process.

And letting time take over.

Denise Barker, author + blogger + copy editor

http://bit.ly/DeniseBarkerBlog

http://bit.ly/AMAZONDeniseBarkerEbooks

http://bit.ly/BNDeniseBarkerEBooks

http://bit.ly/SMASHWORDSDeniseBarkerEBooks

http://bit.ly/KOBODeniseBarkerEBooks

Received My Income Tax Refund

For those of you who mailed in your income tax paperwork yet wanted a direct deposit to your checking, take note I received my refund today.  My documents were mailed 02.07.2012 at my local post office before the last scheduled pickup for the day with sufficient postage attached.  My IRS office within my state probably received my envelope marked "refund due" the following day on 02.08.2012.

And here it is, 02.28.2012, and my bank has the funds!  I cannot e-file with my self-employed author earnings constituting part of my home business (along with my freelancing).  So even without e-filing, the whole process evolved for me within twenty-two days' time.  Not bad.

Hope y'all have received yours by now as well.

Received My Amazon 1099-MISC

It was at my post office box.  Next year I'll know better.  I don't think it was delivered today (even though I'm in the DFW area and corporate Amazon is based out of Seattle) because my mail is not posted to my box until 11:00 a.m.--or so the post office signage says.  I probably got it yesterday, Monday, February 6, or possibly Saturday, February 4.  I don't check my box daily.  Come 2013, at the end of January, beginning of February, I might just do that.

Okay.  Now for finalizing my income tax forms and going back to the post office once again to mail those off.  See how much fun my days are?

Still Awaiting my 1099s

Granted, my mail delivery is not due for another four hours.  But it is the last day of January and I've put off mailing in my tax forms (and getting a nice refund) for these thirty days because I thought I'd avoid any problems if my math did not add up to Amazon's or B&N's.

I'll let you know later this afternoon what I find in my mail box.

Indie-Published Authors, Await Your 1099-MISCs

I am not a tax attorney or an IRS guru, so take the following with a grain of salt.  I'm new to the royalties business, but a quick search of the Amazon Community shows that Amazon sends out 1099s for $10 and more.  See the last of three entries at http://forums.kindledirectpublishing.com/kdpforums/thread.jspa?messageID=46344&#46344 which purports to be answered by a KDP representative.

As for the IRS website, here's a good legal analysis from 2004 where a publisher sends the royalties to the agent who then sends them to the author (after each has taken their cut):  http://www.irs.gov/irb/2004-20_IRB/ar08.html.  Still the author pays taxes on the gross amount, not the amount s/he receives in the end.  In the article, the writer states that in 2004, "the royalties paid by the publisher exceeded $10."  That seems to be relevant from 2004 on through the present.

 

Per the instructions for Schedule E (referenced on line 17 of Form 1040 re royalties), here's an excerpt found at http://www.irs.gov/instructions/i1040se/ch02.html#d0e477:

     Royalties.   Report on line 3b royalties from oil, gas, or mineral properties

     (not including operating interests); copyrights; and patents. Use a separate 

     column (A, B, or C) for each royalty property.   If you received $10 or 

     more in royalties during 2011, the payer should send you a Form 

     1099-MISC or similar statement by January 31, 2012, showing the 

     amount you received. Report this amount on line 3b.   If you are in 

     business as a self-employed writer, inventor, artist, etc., report your 

     royalty income and expenses on Schedule C.

 

Based on the above, ignore line 17 of the 2011 tax form 1040, for reporting of royalties and asking for the attachment of Schedule E, Supplemental Income and Loss, and use Schedule C instead for reporting author royalties.  

 

I'll advise when I receive my 1099-MISC from Amazon and B&N.  In the meantime, I can still be gathering all my other info and drafting out my 1040 and various schedules, forms.  

 

For the Indie-pubbed authors, await those 1099-MISCs forms--even though we do not attach them to the 1040, like we would for a W-2.  Per the IRS website, we should receive them by January 31.

Ahem.  And I was expecting a refund this year, so I won't be getting it in January.  

Good luck, all!