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Estimated Taxes: What Side Hustlers and Freelancers Need to Know?

Social Security Check Features Huge COLA Increase
Social Security Check Features Huge COLA Increase (PHOTO: QZ)

If you haven’t paid your estimated quarterly taxes for 2022 in full, you still have time to avoid tax penalties and file your final payments with the IRS.

Quarterly estimated tax payment is a smart move for those who work part-time, do freelance work, or own a business. If you have other income that is not subject to withholding (interest, dividends, capital gains, child support, cryptocurrency, or rental income), you are generally required to pay the IRS an estimated tax amount on a quarterly basis.

Not only will this minimize your financial burden when tax day comes, but it will also help you avoid IRS self-employed penalties for not paying throughout the year.

The process of filing your estimated tax may seem complicated, but we’re here to make it easy for you. Here’s everything you need to know to calculate your taxes and file your taxes on time.

READ ALSO: IRS Completes Corrections For Tax Year 2020 Accounts Relevant To Unemployment Compensation Exclusion

What is Estimated Tax?

If you earn or receive income that is not subject to federal withholding tax during the year (for example, non-employment income or income from rental housing), pay the estimated tax amount as appropriate. Estimated tax is your quarterly payment based on your income for that period. Essentially, estimated taxes allow you to pay a portion of your income tax in advance every few months to avoid paying it all at once when you file your tax return. When is the estimated tax due?

Estimated taxes are paid quarterly, usually, it is on the 15th of April, June, September, and the following year on the 15th of January. A notable exception is when the 15th falls on a holiday or weekend. In this case, the statement must be submitted by the next business day.