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regarding 'quarterly estimated earnings' and CPA

Discussion in 'Business & Tax Advice' started by devnetbox, Apr 11, 2016.

  1. devnetbox

    devnetbox Newbie

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    Hey all.

    I was just wondering, in regards to earnings from my CPA and quarterly estimated earnings how would that process work?

    As it is right now my income with CPA is a bit unstable so some months I will earn more than others.

    How exactly does this work in terms of filing with the IRS in this way (estimated quarterly income)?

    How do us some of you pay? Do you pay for everything during tax season or do you use estimated quarterly earnings? For the record I am in the US.

    Any advice is appreciated.
     
  2. loedown

    loedown Jr. VIP Jr. VIP

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    I only pay what I owe, I never estimate.
     
  3. ChanzGrande

    ChanzGrande Elite Member

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    This is really a question better directed to a tax attorney obviously, but for the average online marketer in the USA it actually depends on your overall earnings estimates for the year. I realize CPA is a bit volatile and it can be challenging for you to make these estimations, but seriously ... it's not that challenging, right? You just don't want to actually make those quarterly payments.

    Well, you also don't want to have a major tax liability at the end of the year and find yourself in a particularly slow CPA earnings period. So that's why it is important to make those estimations.

    From the perspective of the IRS the thing that matters is the question of "at the end of the year will you owe us money?"

    If the answer is a likely "yes" based on your past tax returns or significant increases in current earnings, then frankly - you probably ought to make those payments. On the other hand, if you are typically in a very low tax bracket and earning what you did last year roughly, and you had limited to no tax liability at the end of the year, then you might be able to skirt the issue.

    Only taxpayers who expect to have a financial obligation to the IRS will typically make estimated withholdings, or those in generally higher tax brackets. If you're going to owe over 25% of your earnings to the IRS at year end, and fail to make those quarterly payments you can owe them a lot in tax payments, and also be penalized excessively making your tax burden much higher, and in some cases unpayable leaving you with the pains of owing money to one of the most powerful organizations in the world.

    I think you know the answer. Just do what makes sense in your situation, or ask an actual tax attorney.

    ---

    Despite my overly cautious diatribe above, I also don't make quarterly estimated payments, so I just wanted to clarify that as I said ... this is largely determined by earnings and expected tax liabilities. If you can pay a huge bubble payment at the end plus penalties - many people still don't bother to make the quarterly payments.
     
    Last edited: Apr 11, 2016