I estimated quarterly taxes. Here’s what happened.

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Figuring out your predicted income for your estimated quarterly taxes can be a guessing game. Click to see how I did for 2015, and what I plan to change for 2016.

Last year I started paying estimated quarterly taxes for the first time. I laid it all out, and decided that I’d pay even though the IRS’s worksheet said I didn’t have to.

I was a little nervous about what was going to happen this Spring. Would I owe a ton of money? Would I get a ton of money back? All of my figures were based on guess work since our income is so variable. Anything could happen. I think I might look into using a W-4 estimator this year, just to get a more accurate idea of what I’m working with.

Income Results

As I was figuring out my estimated quarterly taxes for this year, I went back to my paperwork from last year to see how I had figured everything out. It turns out, my shot-in-the dark assumption for income was only $1,000 off….not bad! I used the same process to predict this year’s income; we’ll see how things pan out for 2016 tax season.

Estimated Quarterly Taxes Results: Federal

When I filed this year, I got a decent size check back from the Federal government. This was after paying for taking too much of a subsidy with our health insurance. (I should probably do my IRS income predictions earlier in the year so I can use it for my marketplace application, where I always seem to underestimate our income.)

That was a nice surprise, though if I had not been making those quarterly payments, we would have owed.

Estimated Quarterly Taxes Results: State

State was the worst. I used the same number to figure out my state taxes, but did take into account the taxes withheld from my employer for my day job…which dried up suddenly last Fall. So I owed over $100.

Estimated Quarterly Taxes Results: Local

My local taxes had the best formula to help you figure out how much you’d owe. They have you do the exact math quarterly. Best. System. Ever.

I’m getting a negligible refund from them. I was extremely close to having paid exactly the right amount.

Paying in 2016

This year I used the same formula to figure out how much we might make in 2016, adjusted my formula for our state tax burden and wrote some pretty massive checks. That’s the thing about increasing your income, especially when you’re a freelancer: those tax checks get painful to pay.

I’m choosing to think about all the good things that my taxes might be paying for to get over the psychological gut punch. Though it would be pretty cool if we could only pay for the portion of the budget we supported like Maggie Gyllenhaal tried to do in Stranger than Fiction.

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15 thoughts on “I estimated quarterly taxes. Here’s what happened.

  1. Money Beagle

    The only tax that I’ve seen where you know where it’s actually going is our property taxes. For that we actually get a breakdown to the penny of what goes where, like to the city, to the school debt fund, to the school operating fund, etc. You obviously don’t know from there where exactly it goes but it is nice to see that breakdown to some degree.

    Reply
  2. Tyler @ I Am The Future Me

    I need to really start looking into this. Until near the end of last year all of my income came from an employer so I never had to worry about taxes it came out of my check I paid it and that was that. I got a refund spent that on whatever (usually paying debt down) and called it a day. Now though I’m making income to the point where I’m sure I need to start paying quarterly taxes or at a minimum put money aside to pay the tax man come next year. Something I really need to look into I think this article is gonna give me the push I need to find out what I need to do.

    Reply
    1. Femme Frugality

      If I remember correctly, you still work for an employer with a W-4 in place? (Forgive me if memory serves incorrectly.) If so, you MAY not need to do quarterlies. If you go to IRS.gov and look up the estimated quarterly taxes form, they have a worksheet that helps you figure it out. Another potential option would be to increase your withholding from your employer so you don’t have to worry about it. Definitely run the numbers!

      Reply
  3. The Practical Saver

    Every year, I always estimate my taxes. I get pretty close to the federal tax every time. But as far as state tax is concerned, it’s a hit or miss. One year, I was a few dollars and the next year was close to a $500, which I guess was still good. Since our family’s tax situation is pretty straightforward, those are the only things I care about calculating.

    Reply
  4. Hayley @ Disease Called Debt

    Here in the UK, I try to save a quarter of my salary since tax usually equates to 25% of my income. With that said, I can usually manage to shave a bit more off my tax bill thanks to everyday self-employed expenses! Good job on your estimations!

    Reply
  5. Femme Frugality

    Huh. Does that include taxes for health care? The comparison is completely anecdotal, I know, but I set aside 30% after accounting for expenses, and it usually ends up being exactly what is due quarterly. Just find it interesting because one of the major arguments against universal health care is the high tax rate citizens of countries like the UK burden. (What we have is hardly universal care, and the debate goes on despite the ACA.) I also pay an obscene amount every month for our coverage on top of taxes, though because we aren’t offered affordable care from any employer, I can deduct the cost as a self-employed person to lower the amount of income the government taxes (not the taxes directly.)
    Not trying to open up a political debate for my American readers. Just truly interested in how it works from someone who actually lives it.

    Reply
    1. Hayley @ Disease Called Debt

      In the UK, we pay National Insurance (NI) which is different to the tax return we have to do for our income. NI is for our National Health Service, our state pension and it goes towards unemployment benefits for people who aren’t in work (or disability benefits). If someone is employed, they have NI and tax deducted from their wages every month. For me being self employed, I pay my NI when I pay my tax bill once per year, but I always know how much it’s going to be because there are a few different levels of NI – I pay Class 2 contributions which are about £2.80 per week. In addition, we can opt for private healthcare on top, this can be anything from £100 per month upwards. I don’t bother with this (so far in my life), the NHS has looked after me whenever I’ve needed it! The waiting times for treatment is the biggest downside to the NHS, but personally I’ve never had much of a problem with this.

      Reply
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