Can Irs Form 13844 Estimated 2024

Okay, hi, I'm Jeffrey Bellamy. Today, I'm gonna talk a little bit about estimated tax payments and self-employment tax. Music. It's my goal to give a business perspective on how to avoid owing taxes. Our tax system operates on a pay-as-you-go basis. Right now, I'm an employee, so when I make a thousand dollars, I only get a check for seven hundred and forty-two dollars, because my employer withholds my federal and state income tax and my social security and medicare contributions. However, when I'm self-employed, I have to be both the employer and the employee. This means I have to afford my own federal and state income tax payments and contribute to social security and medicare. These contributions are known as self-employment tax and amount to 15.3% of my net income. So, for every thousand dollars I earn as a self-employed individual, I owe a hundred and fifty-three dollars to the IRS to cover my social security and medicare. Apart from understanding the basics of self-employment tax, the first question that comes to mind for many people is how much they should pay and how often. Well, the answer to how much you should pay depends on two choices: the hundred percent rule and the 90 percent rule. The hundred percent rule is simple. Look at how much tax you owed last year according to your tax return and divide that by twelve. The result is the amount you should be paying in estimated tax installments this year. The IRS recommends paying quarterly, but I suggest most of my clients to pay monthly. The reasoning behind this is that it's easier to budget smaller monthly payments rather than one large quarterly payment. On the other hand, the 90 percent rule is useful if your earnings this year differ significantly...