Estimated Tax Payments

Calculate Your Estimated Tax Payments

Here's what you need to do each quarter:

  1. Calculate Your Estimated Tax Payments
    Calculate your Federal and State estimated tax payments as follows:

    1. Federal Tax
      The Federal tax that you must pay consists of two components: an Income Tax and a Self-Employment Tax.

      1. Federal Income Tax
        Please note that, for Federal income tax purposes, long-term capital gains (LTCGs) income is taxed at preferential rates, whereas short-term capital gains (STCGs) income is taxed at ordinary rates.
        1. Add your net self-employment income, short-term capital gains (STCGs) income and any alimony received together. This subtotal is your Taxable Self-Employment Income (TSEI).

          The amount of Federal Income Tax that you should pay will depend upon your TSEI, as follows:

          TSEI
          (Married, filing jointly)

          TSEI

          Estimated
          Tax Rate

          Over $500,00 Over $250,000 30%
          $350,000 - $500,000 $175,000 - $250,000 25%
          $200,000 - $350,000 $100,000 - $175,000 20%
          $100,000 - $200,000 $50,000 - $100,000 15%
          < $100,000 < $50,000 10%


          Multiply your TSEI by the applicable percentage from the above table.
        2. The amount of Federal Income Tax that you should pay on your long-term capital gains (LTCGs) income will depend upon your Total Taxable Income (TTI) as follows:

          Year
           

          TTI
          (Married, filing jointly)

          TTI
          Single filers

          LTCG
          Tax Rate

          2022 Over $517,200 Over $459,750 20%
          $83,350 - $517,200 $41,675 - $459,750 15%
          < $83,350 < $41,675 0%
                 
          2021 Over $501,600 Over $445,850 20%
          $80,800 - $501,600 $40,400 - $445,850 15%
          < $80,800 < $40,400 0%


          Yes, you read this correctly. Taxpayers won’t pay any capital gains tax on their LTCG income if their total taxable income is below the minimum threshold indicated in the above table.

          Multiply your long-term capital gains (LTCGs) income by the applicable percentage from the above table.

          Add these two subtotals together. This is the amount of Federal estimated income tax that you will pay.

      2. Federal Self-Employment Tax
        The Federal Self-Employment Tax applies only to income received from self-employment, as an independent consultant, or as a subcontractor (if you received income from alimony, investment income or rental property, you may skip this step.)

        The Federal Self-Employment Tax is simply the sum of the standard Social Security and Medicare taxes, but levied twice - once on yourself as the employee, and a second time as the employer. This is exactly the same way that these payroll taxes are levied on the W-2 income of employees, and on the payroll of their employers. The Self-Employment Tax can be summarized as follows:

        Payroll Tax

        Employee Portion

        Employer Portion

        Total

        Social Security 6.20% 6.20% 12.4%
        Medicare 1.45% 1.45% 2.9%
        ------ ------ ------ ------
        Total 7.65% 7.65% 15.3%


        The Self-Employment tax is in addition to the Federal estimated income tax that is calculated in Paragraph 1 above.

        Normally, you should multiply your Net Income from Self-Employment by 15.3%. This is the amount of Federal Self-Employment tax that you will pay. However, the maximum earnings that are subject to the Social Security payroll tax is capped each year as follows:

        Tax Year

        Maximum
        Taxable Earnings

        2022 $147,000
        2021 $142,800
        2020 $137,700


        Any earnings from self-employment received above these annual amounts are not subject to the Social Security tax. Once your Net Income from Self-Employment has exceeded this threshold, which usually occurs later in the year, you should multiply your Net Income from Self-Employment by just 2.9%.

        Reduction in Total Income
        . When you file your Form 1040 income tax return, you will receive a reduction (NOT a credit) of 50% of the total Federal Self-Employment Tax that you paid during the year. This adjustment to your income is reported on Schedule 1, Part II of your Form 1040 return.

        In the overall scheme of Federal taxation, this reduction will have a minimal impact upon the final result of your return when compared with the amount of Federal Self-Employment Tax that you’ve paid.

        Social Security Benefits. When you reach retirement age, you may become eligible to receive Social Security benefits at that time. The Social Security benefits that you do receive will effectively be repayment of the Social Security portion (i.e., the 12.4%) of the Federal Self-Employment Taxes that you had paid while you were self-employed.

        However, if you had worked as a Federal, state or municipal employee during your career, and contributed into a separate plan, you would not be eligible to receive Social Security benefits. In this case, the Federal Self-Employment Taxes you paid are, unfortunately, exactly that – additional taxes.

      3. Add The Two Federal Taxes
        Add your Federal Income Tax and your Federal Self-Employment Tax together. This is the amount of Federal estimated income tax that you will pay.

    2. State Income Tax

      1. Massachusetts residents only
        Please note that, for Massachusetts income tax purposes, long-term capital gains (LTCGs) income is taxed at the ordinary rate, whereas short-term capital gains (STCGs) income is taxed at much higher rate of 12.0%.
        1. Add all of your interest, dividends, net self-employment income, long-term capital gains (LTCGs) income and any alimony received together. Do not include your nNet Massachusetts short-term capital gains (STCGs) income in this subtotal. Multiply this subtotal by 5.0%.

        2. Multiply your Net Massachusetts Short-Term Capital Gains Income by 12.0%.

        3. Add these two subtotals together. This is the amount of Massachusetts estimated income tax that you will pay.

      2. New Hampshire residents only
        Multiply your Net N.H. Investment Income by 5.0%. This is the amount of N.H. estimated income tax that you will pay.

  2. Payment Due Dates

    Estimated Tax Payments are not due at the same time each Quarter. Here is the schedule of the payment due dates: 

    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)


  3. Make Your Estimated Tax Payments
    You may pay your Estimated Tax Payments online, or you may mail a check to the respective tax authority.

    1. Federal Income Tax
      To make your Federal Estimated Tax Payment online through a direct debit from your checking or savings account at no cost to you, please visit:



      To make your Federal Estimated Tax Payment by mail, make a check payable to "United States Treasury" in the amount of the Federal estimated tax, write your SSN and "202X 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.

    2. State Income Tax

      1. Massachusetts residents only
        To make your Massachusetts Estimated Tax Payment online through a direct debit from your checking or savings account at no cost to you, or with your American Express, Discover, MasterCard or VISA credit card plus an additional convenience fee of 2.30% of the amount of your payment, please visit:



        To make your Massachusetts Estimated Tax Payment by mail, make a check payable to "Commonwealth of Massachusetts" in the amount of the State estimated tax, write your SSN and "202X 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.

      2. New Hampshire residents only
        To make your New Hampshire Estimated Tax Payment online through a direct debit from your checking or savings account at no cost to you, please visit:



        To make your New Hampshire Estimated Tax Payment by mail, make a check payable to "State of New Hampshire" in the amount of the N.H. income tax, write your SSN and "202X Form DP-10 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 DP-10 ES to the address printed on the form.


Tax Tip

Make your Federal and State estimated tax payments on time.  If you postpone making such tax payments until the following April (or even later), you run the risk of being assessed with late payment penalties, underpayment penalties and/or interest charges.  Why pay the IRS and/or State tax authorities any more than they are entitled to receive?

e-Filing an Extension

e-Filing an Extension will automatically grant the taxpayer up to six (6) months of additional time to prepare and e-file their income tax return.

However, e-Filing an Extension does NOT:

  1. Grant the taxpayer additional time to pay their Federal and/or State income tax liabilities.
  2. Absolve the taxpayer from being assessed with late payment penalties, underpayment penalties and/or interest charges.

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