If you have an employer or are self-employed, you should be estimating taxes. The purpose of filing taxes is to see if you paid enough taxes throughout the year. If you have an employer, you complete a W4 they’ll know how much taxes to take out of your check. If you’re self-employed, you have to withhold the taxes on your own.
In order to estimate the amount, use the W4 Estimator created by the IRS. This tool should be used if you are an employee or self-employed. In order to use, you will need:
- Filing Status
- Total Income
- Most Recent Paystub(s) & Pay Frequency (if employee)
- Total Expected Earnings (Self-Employed)
- Any additional Earnings (Dividends, Rental Income, Investment Sale, Retirement Distributions, Lottery Winnings, etc)
- Applicable Adjustments, Deductions, & Credits
Here are a few tips when using the W4 Estimator to estimate taxes as a self-employed person with no employer income.
- It will ask “Do you (or will you) have a job that regularly withholds federal income taxes from your paychecks?”, you must answer Yes.
- At the “My First Income Source” section, choose “Salary” as your income source. Then choose “I do not hold this job yet; I expect to start this job later this year”. When the date box appears, enter a future date as the start and end date. Chose “Once a month” when it asks “How frequently will you be paid?” Then enter 0 as your annual salary. Answer Yes when it asks you to confirm the amount, then click “none of the above” for the next questions. After that section, enter your self-employment net income information.