In simple words, we can define quarterly taxes, or estimated quarterly payments are taxes that a self-employed person has to pay to the Internal Revenue Service every quarter. The quarterly payments are intended for all taxpaying American citizens who do not have withholding tax taken from their wages and expect to owe a minimum of USD 1000 in taxes. Personnel such as independent contractors, small businesses, etc., are liable to pay quarterly taxes. In addition, quarterly tax payments can also apply to anyone who receives additional untaxed income, such as –
Dividends
Business distributions
Large capital gains
Alimony
Significant investment income
Before diving into the nitty-gritty of a quarterly tax payment calculator, let us understand what fiscal quarters are.
WHAT ARE FISCAL QUARTERS?
A fiscal quarter is a three-month period in a company’s financial year that serves as the premise for periodic financial reports and the paying of dividends. A quarter is one-fourth of a year and is typically expressed as Q1 for the first quarter, Q2 for the second quarter, and so forth. Quarterly tax payments should be made four times a year. Although they are beneficial for the organization of financial information and comparing data across prior quarterly periods, the process adds to extra report costs and burdens. Hiring a tax professional or using a calculator is handy, especially for freelancers and small businesses.
WHAT IS A QUARTERLY TAX CALCULATOR? WHY DO YOU NEED IT?
A quarterly tax payment calculator is an AI-powered tool is designed to help freelancers, independent contractors, and small businesses file their quarterly payments. It helps the user determine how much quarterly taxes they owe to the federal state. Some of the veritable advantages of a tax calculator are –
Helps Dodge Penalties - Estimates suggest that 25 percent of American freelancers skip paying their quarterly taxes, which results in penalties. As such, opting for a quarterly tax calculator helps independent contractors to pay their quarterly taxes on time, without any hassle or stress, and dodge the heavy penalties.
Incorporate Deductions – As per statistics, 75 percent of freelancers in the USA do not consider all the deductions while calculating their quarterly tax payments, resulting in overpayments or penalties. However, an AI-powered estimated tax payment calculator automatically finds every deduction, and all the user has to do is answer some questions.
Efficiency – Most quarterly tax payment calculators are incredibly fast and deliver results in minutes. Therefore, freelancers do not have to spend hours scratching their heads while calculating their quarterly payments.
Affordability – Hiring a professional tax consultant can burn a hole in anyone’s pockets. As such, a tax calculator becomes an affordable substitute. Many high-quality, AI-driven tax calculators available online are free to use. Thus, freelancers, small businesses, and independent contractors do not have to spend extra money on tax calculations.
Accuracy –While estimating quarterly payments manually, human errors are common. On the contrary, a quarterly tax calculator offers 100 percent accuracy in its estimations. Thus, the user does not have to fret about underpayment, mistakes, etc. constantly.
So, there we have it, the top five reasons why freelancers and independent contractors should opt for a quarterly tax payment calculator.