Quarterly Estimated Taxes are Due Next Week for Q2 2015
Just to remind you, the second payment for 2015 Estimated taxes is next week, 6-15-2015! The first one (Q1 2015) was back on April 15th when you filed your taxes
For additional tax resources from Rideshare Dashboard, check out my popular online course for Uber, Lyft and Sidecar Taxes!
Do I need to pay Federal Estimated Taxes?
So throughout the year, I was diligent to calculate my federal estimated taxes as there are some penalties when you don’t pay your federal estimated taxes. There is a small reprieve for new drivers.
Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes
The last part is really important. If you have a higher tax bill this year as last year, you don’t necessarily be required to pay estimated taxes this year. For example, you made $50k in your full time job in 2013 and 2014. You started driving in Jan 2014, and now you owe some taxes as you made $10k in 2014. If you keep all of your withholdings for taxes in your full time job the same for 2013 and 2014, you wouldn’t need to pay estimated taxes in 2014 for your additional rideshare income.
Despite this, I still paid my estimated taxes anyway so that I can get used to it as I wouldn’t qualify for it in 2015. I expect to be driving about as much this year as last year so I would now need to pay estimated taxes in 2015, instead of not being penalized for it.
For those who have driven last year and driving the same amount this year, you will need to pay estimated taxes. This year, I am required to pay it.
Here are some other links:
When do you pay Estimated Taxes?
Here are the dates for the quarterly estimated taxes:
| Payment Period | Due Date |
|---|---|
| January 1 – March 31, 2015 | April 15, 2015 |
| April 1 – May 31, 2015 | June 15, 2015 |
| June 1 – August 31, 2015 | September 15, 2015 |
| September 1 – December 31, 2015 | January 15, 2016 |
Estimated State Taxes:
I only checked a few states, but if you owe more than a few hundred ($400 in MA, $500 in CA) in state taxes that is not covered by withholding from your other jobs, then you will need to pay estimated taxes at a state level. State taxes vary between 0 in Texas and Florida to as high as 8% if you earn over 80K in California. So if you earned a few thousand dollars this quarter, you may need to pay estimated state taxes.
Remember, there are also taxes at a city level so make sure to watch out for that as well.
Luckily, most states have the same stipulation as the federal taxes in that if your tax burden is higher in 2014 than 2013, you wouldn’t need to pay estimated taxes if you paid the same amount of taxes this year as last year. So for me, I wouldn’t be penalized for not paying my estimated state tax in 2014, but now its 2015 so I would have to pay it, assuming I am making similar amounts of money this year as last year from rideshare.
So here is the summary:
- Calculate your federal estimated taxes: its your nominal tax bracket (mines is 28%) + self employment tax (made up of Social Security and Medicare, 15.3%, half of which is tax deductible) – deductions (Mileage or expenses)
- Calculate your state estimated taxes: its your state income tax. For example in California, it is a graduated income tax so find out which tax bracket you fall into
- Check to see if you owe any city or local estimated taxes. I just happen to pull up Akron, Ohio tax page and it says 2.25% for Akron residents, which is in addition to the Ohio State Income Tax.
Estimated Tax amount from last years tax return
In TurboTax, towards the end of the filing process, they will ask you if you want to calculated your estimated taxes for 2015. They will then calculate how much taxes you owe on top of your normal withholding (if any) from your other jobs, and then divide by 4 to get your quarterly estimated tax payments. The software is able to calculate what you would owe in State taxes. I am unsure if they can calculate city taxes but it could be under the state taxes section.
For those with the software, you can open your existing 2014 tax return and then go towards the end to find the estimated taxes section to calculate what the quarterly estimated tax payments would be for 2015. All of the quarterly estimated tax payments are equal in amount, even though each payment is for the months preceding it.
Still confused?
If you are generally concerned about all of this information and do not know what to do, go seek professional help. It is a small price to pay for a professional to take a look and also maximize your deductions, which can be in the hundreds, if not thousands of dollars. Make sure to find a certified tax preparer that is comfortable with dealing with self employment income or taxi/limo industry.
Have you taken a look at what you owe for taxes? Did last year’s taxes give you a sense of how much you will owe quarterly in estimated taxes?
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