Lexington, MA: 781.274.6600
Sunapee, NH: 603.763.0350
Inquiry Form
Tax Tips - Save on Taxes

Self-Employed Individuals

Self-employed individuals, such as construction contractors, instructors and real estate professionals, should make estimated income tax payments on the net business income they earn quarterly.  Otherwise, they will receive a huge, unwelcome income tax bill in March.

Each business or individual for whom you work should ask you to provide a completed Form W-9.  You can obtain a blank Form W-9 here: https://www.irs.gov/pub/irs-pdf/fw9.pdf.  Once you’ve filled in and signed your Form W-9, you can provide a copy of the same completed Form W-9 to each business or individual for whom you work.

Pay attention to the Estimated Tax Payment Due Dates! They are not scheduled at the same time for each Quarter. 

Quarter

Dates Included

Due Date

1 Jan. 1 to March 31 April 15
2 April 1 to June 30 June 15
3 July 1 to Sept. 30 Sept. 15
4 Oct. 1 to Dec. 31 Jan. 15 (of the following year)

 

Here's what you need to do each quarter:

  1. Gross Revenue
    Add all of the cash and checks that you received during the quarter.

  2. Expenses
    Add all of the business expenses that you incurred during the quarter. Ignore your vehicle mileage and Depreciation expense for now.

  3. Net Income or (Loss)
    Subtract your Expenses from your Gross Revenue.

  4. Estimated Federal Income Tax
    Multiply your Net Income by 22.65% (= Federal income tax of 15% plus Federal self-employment tax of 7.65% (i.e., Social Security tax of 6.2% plus Medicare tax of 1.45%)). This is the amount of Federal estimated income tax you will pay. (I include the Federal self-employment tax in this calculation so that you won’t be surprised with a large Federal income tax bill in March)

    Make a check payable to "United States Treasury" in the amount of the Federal tax, write your SSN and "201X Form 1040-ES" (replace “X” with the last digit of the year) on the front of your check, and sign it.

    Mail your check along with the corresponding Form 1040-ES to the address printed on the form.

  5. Estimated State Income Tax (Massachusetts residents only)
    Multiply your Net Income by 5.1%. This is the amount of Mass. estimated income tax you will pay.

    Make a check payable to "Commonwealth of Massachusetts" in the amount of the Mass. tax, write your SSN and "201X Form 1-ES" (replace “X” with the last digit of the year) on the front of your check, and sign it.

    Mail your check along with the corresponding Form 1-ES to the address printed on the form.


Tax Tip:

Make your 4Q Mass. estimated tax payment during the last week of December, instead of on Jan. 15. This will allow you to deduct that one payment on this year’s Federal income tax return. (There is no tax benefit for making your 4Q Federal payment any earlier)

I would be happy to prepare a complete set of pre-filled-in Federal Form 1040-ES and Mass. Form 1-ES forms for you to use to make your quarterly estimated tax payments.

 

Return to Top

Home | Company Profile | Clients | Services | Partners | Testimonials | Tax Tips | Resources | Contact Us
Copyright © 2010 - - All rights reserved. TwardyCPA.com & the TwardyCPA Logo are trademarks of Joseph T. Twardy, Jr., CPA, LLC.