I'm concerned because my check for payment to the IRS has not been cashed yet. What should I do?

If it had been at least two weeks since the payment was sent to IRS, you should check with your financial institution immediately before you call us. If the check has still not cleared your account call (800) 829-1040 and ask an IRS representative if the payment has been credited to your account. If the payment has not been credited and your check has not cleared you may choose to place a stop-payment on the original check and send another payment.

What, if any, quarterly forms must I file to report income as an independent contractor?

Because you generally will have no withholding taken from your income, you may need to make quarterly estimated tax payments. For information on how to make estimated tax payments refer to Form 1040-ES (PDF), Estimated Tax for Individuals.

You need to be aware that there may be state and local requirements for estimated tax payments. You can start looking for information at How to Contact Us . You may want to go to your state's individual Web site for additional information. To access the state you need go to our Alphabetical State Index .

References:

• Publication 505, Tax Withholding and Estimated Tax
• Tax Topic 355, Estimated Tax
• Publication 334, Tax Guide for Small Business

Is an S-Corporation required to pay quarterly estimated tax?

Rarely does an S corporation make estimated tax payments. On rare occasions the following taxes may have estimated consequences if the total of these taxes is more than an amount specified by law:

1. the tax on certain capital gains,
2. the tax on built-in gains,
3. the excess net passive income tax, and
4. the investment credit recapture tax.

For more information regarding estimated tax, refer to Form 1120S Instructions, U.S. Income Tax Return for an S Corporation, under topic Estimated Tax Payments, and Publication 542, Corporations, under topic Paying and Filing Income Taxes.

How do partnerships file and pay quarterly estimated tax payments?

Partnerships file Form 1065 (PDF), U.S. Partnership Return of Income, to report income and expenses. The partnership passes the information to the individual partners on Schedule K-1, Form 1065. The partners report the information and pay any taxes due on Form 1040. Because partners are not employees of the partnership, no withholding is taken out of their distributions to pay the income and self-employment taxes on their Forms 1040. The partners may need to pay Estimated Tax Payments using Form 1040-ES.

Refer to Form 1065 Instructions, U.S. Partnership Return of Income and Chapter 2 of Publication 505, Tax Withholding and Estimated Tax, for additional information.

How do I know if I have to file quarterly individual estimated tax payments?

Who Must Pay Estimated Tax

If you owed additional tax for 2006, you may have to pay estimated tax for 2007.

General Rule

You Must Pay estimated tax for 2007 if both of the following apply.

1. You expect to owe at least $1,000 in tax for 2007, after subtracting your withholding and credits.
2. You expect your withholding and credits to be less than the smaller of:

-------a. 90% of the tax to be shown on your 2007 tax return, or

-------b. 100% of the tax shown on your 2006 tax return. *Your 2006 tax return must cover all 12 months.

--------* Certain taxpayers with higher adjusted gross income must substitute 110% for 100%. Refer to Chapter 2 of Publication 505, Tax Withholding and Estimated Tax, for the income amounts that the higher percentage applies to.

References:

• Publication 505, Tax Withholding and Estimated Tax
• Form 1040-ES (PDF), Estimated Tax for Individuals

Do self-employment taxes need to be paid quarterly or yearly?

If you are required to make estimated tax payments, self-employment tax is paid by making quarterly estimated tax payments which include both income tax and social security tax.

References:

• Publication 334, Tax Guide for Small Business
• Publication 505, Tax Withholding and Estimated Tax

When are the quarterly estimated tax returns due?

Your first estimated tax payment is usually due the 15th of April. You may pay the entire year's estimated tax at that time, or you may pay your estimated tax in four payments. The four payments are due April 15th, June 15th, September 15, and January 15th of the following year.

If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that is not a Saturday, Sunday, or legal holiday.

References:

• Publication 505, Tax Withholding and Estimated Tax, Chapter 2.

If I anticipate a sizable capital gain on the sale of an investment during the year, do I need to make a quarterly estimated tax payment during the tax year?

You would be liable for estimated tax if the following applies:

General Rule

You must pay estimated tax for 2007 if both of the following apply.

1. You expect to owe at least $1,000 in tax for 2007, after subtracting your withholding and credits.
2. You expect your withholding and credits to be less than the smaller of:

......... a. 90 % of the tax to be shown on your 2007 tax return, or

......... b. 100% of the tax shown on your 2006 tax return. * Your 2006 tax return must cover all 12 months.

*Certain taxpayers with higher adjusted gross income must substitute 110% for 100%. Refer to Chapter 2 of Publication 505, Tax Withholding and Estimated Tax, for the income amounts that the higher percentage applies to.

You may be able to annualize your income. Please see Publication 505, Tax Withholding and Estimated Tax, Chapter 2, for more information. If you are making estimated tax payments you can increase your quarterly estimated tax payments or increase your Federal income tax withholding to cover the tax liability. If you have the proper amount withheld you may not be required to make estimated tax payments nor have to file Form 2210 (PDF), Underpayment of Estimated Tax by Individuals, Estates and Trusts, with your tax return (as you would if you just increased the remaining estimated tax payments). If you wait and make increased estimated tax payments in the later quarters, you would have to file Form 2210 with your tax return because we do not know when you received the income. Since you really did not receive the income evenly throughout the year, you have to tell us when the income was received by filing Form 2210.

References:

• Form 1040-ES (PDF), Estimated Tax for Individuals
• Tax Topic 306, Penalty for Underpayment of Estimated Tax

I am self-employed. How do I report my income and how do I pay Medicare and social security taxes?

Your self-employment income is reported on Form 1040, Schedule C (PDF), Profit or Loss from Business, or on Form 1040, Schedule C-EZ (PDF), Net Profit from Business.

Your Medicare and social security taxes are reported on Form 1040, Schedule SE (PDF), Self-Employment Tax.

As a self-employed person, you pay your Medicare and social security taxes the same way you pay your income taxes. If you expect to owe less than $1,000 in total taxes, you can pay them when you file your income tax return. If you expect to owe $1,000 or more in total taxes, you will need to make estimated tax payments. These payments are made quarterly using Form 1040-ES (PDF), Estimated Tax for Individuals. You will need to figure these taxes at the beginning of the year. To learn about figuring and making estimated tax payments, please refer to Publication 505, Tax Withholding and Estimated Tax.

I just started a small business and want to know if I have to file my income taxes quarterly or at the end of the year?

The Federal Income Tax return is filed annually. As a self-employed individual, if after deducting withholding and credits you expect to owe more than the amount allowed by law at the end of the year, you should make estimated tax payments on a quarterly basis. Form 1040-ES (PDF), Estimated Tax for Individuals, will assist you in determining if estimated tax payments are due and how they are paid.

When you file the income tax return at the end of the year, you include the income from the business on the return. The forms to be filed are Form 1040 (PDF), U.S. Individual Income Tax Return, Form 1040, Schedule C (PDF), Profit or Loss from Business, and Form 1040, Schedule SE (PDF), Self-Employment Tax. If estimated tax payments were made during the year, they will be claimed on the individual income tax return as payments. See Form 1040 (PDF), Line 65.

References:

• Publication 583, Starting a Business and Keeping Records
• Publication 505, Tax Withholding and Estimated Tax
• Publication 334, Tax Guide for Small Business