Estimating The Taxes

Jennifer is a stay-at-home mom who is running her own business, but she's unsure of how to handle the taxes.

QUESTION: Jennifer in Los Angeles had a baby last year and became a stay-at-home mom. But she's working part-time now on a 1099 from home, earning $1,200 a month. Does she have to do estimated taxes, and if so, how does she do that? Hear the answer straight from Dave's guy, Norm "The Tax Man" Rollins.

Norm's ANSWER: You do have to do estimated tax. Let’s say you net $1,000 a month. You’ll have to set aside 15.3% for your proportionate share of FIC and Medicare since you are the employer and the employee, and 15% tax. So a round number of about $300 is to be set aside each month. Then go online to IRS.gov and pull form 1040-ES.

The quarterly estimates are then due April 15, June 15, September 15 and January 15 of next year. They don't really fall quarterly, but it's based on each quarter. Go to your bank and open a separate tax account.

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