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Tax Question

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Community Leader
David D Member Since: Jun 8, 2016
1 of 11

I am sure this question has been asked before so apologies in advance if it's redundant. 

 

For the first time in my life, I'm earning a significant amount freelancing (yay!) and I'm curious about taxes (boo). Specifically in the USA.

 

Does anyone make pre-payments to the IRS in order to avoid getting hit with a massive amount come April 15th? If so, what do you file as? I'm assuming 1040-ES. 

 

Any hints, tips, thoughts, ideas would be welcome. Thanks!

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Community Guru
Virginia F Member Since: Feb 15, 2016
2 of 11

You can make estimated quarterly payments if you want. I never have. The other thing you can do is set aside 15-20% from each job specifically to pay your taxes come filing time.

 

As a freelancer, it's beneficial and well worth it to let a CPA do your taxes. Self-employment forms are a nightmare. If you work from home there are all sorts of deductions you can take. And you can deduct the cost of the CPA, too.

 

And don't forget - Upwork fees can also be written off as the cost of doing business. There's more, but really ... find yourself a good CPA, keep track of your expenses like software, hardware, etc., etc., and let the accountant figure it all out for you.

 

ETA: If you can afford to pay the taxes quarterly, it's probably less painful.

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Community Guru
Scott B Member Since: Nov 20, 2015
3 of 11

I am not an accountant or tax professional.  However, to me giving the government money prior to when it's due is providing them with an interest free advance.  Other than feeling good about the smaller amount you may owe when it is time, I don't see a reason one would do this. 

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Community Guru
Douglas Michael M Member Since: May 22, 2015
4 of 11

Scott,

For some of us, that's a quite sufficient reason—though I would describe it as a matter of managing cash flow rather than "feeling good."

Best,
Michael

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Community Guru
Scott B Member Since: Nov 20, 2015
5 of 11

@Douglas Michael M wrote:

Scott,

For some of us, that's a quite sufficient reason—though I would describe it as a matter of managing cash flow rather than "feeling good."

Best,
Michael


Certainly fair but a larger issue if one doesn't know what their taxes are going to be.  Then of course it can become a cash flow problem.  If you generally know what you are going to owe, you can make the proper plans and get the most for your money.  However, I get that it may be worth giving up the opportunity to gain greater comfort which is a different opportunity.  YMMV.

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Community Guru
Virginia F Member Since: Feb 15, 2016
6 of 11

"giving the government money prior to when it's due is providing them with an interest free advance"

 

We do that every time we put gas in our cars or buy any taxable product - Uncle Sam has his hands in our pockets at all times.

 

 

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Community Guru
Douglas Michael M Member Since: May 22, 2015
7 of 11

@Virginia F wrote:

"giving the government money prior to when it's due is providing them with an interest free advance"

 

We do that every time we put gas in our cars or buy any taxable product - Uncle Sam has his hands in our pockets at all times.

 

 


Virginia and Scott,

 

And about the roads and other public services you had access to prior to beginning your working life we say nothing?

 

There is no "before" and "after" here: The public services are always available, and the taxes are paid periodically, as with income taxes, or incidentally, as in payroll taxes or buying gas.

Best,

Michael 

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Virginia F Member Since: Feb 15, 2016
8 of 11

@ DMM - I thought that's what I was saying ... guess you put it better than I did.

 

@ Jennifer ... I've never paid penalties for not paying quarterly taxes.

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Jennifer M Member Since: May 17, 2015
9 of 11

@Virginia F wrote:

@ DMM - I thought that's what I was saying ... guess you put it better than I did.

 

@ Jennifer ... I've never paid penalties for not paying quarterly taxes.


That's good to know. I have a w-2 gig going that is taking out taxes, so I don't have to worry this year. Was thinking that I would send them money but then spent $10k for "home improvements" yay tax writeoff so decided against it. I'll either break even or owe very little next year anyway.

 

I didn't think I was ever penalized but had no idea if Turbo Tax calculated that.  

 

I agree with don't give the government more than you need to. You should be either cutting even or owing at the end anyway. I'm kinda gambling that I'll cut even but will have some cash moneys in case I owe.

 

OP, if you had any type of real job this year, you probably paid over what you needed. When I worked like 6 months contracting and then 6 months freelancing, I usually cut even or got like $500 back because they always take more than they need to with a w-2 gig.

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Community Guru
Scott B Member Since: Nov 20, 2015
10 of 11

@Virginia F wrote:

"giving the government money prior to when it's due is providing them with an interest free advance"

 

We do that every time we put gas in our cars or buy any taxable product - Uncle Sam has his hands in our pockets at all times.

 

 


I don't really agree with that analogy.  When I buy gas and pay tax on that gas, I need the gas.  I don't need to pay Uncle Sam my annual tax early.  I get nothing for it other than the potential lost investment gain between the time I paid and the time I had to pay.   With the gas I get the ability to continue to drive my car.  

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